The following text is taken from the National Tax Agency’s website.

If an individual newly builds or acquires a house, or expands or reconstructs a house and uses it as a residence, and if the individual has a mortgage loan with a repayment period of 10 years or more and meets certain other requirements, the individual can deduct a certain amount of income tax every year for 10 years (13 years as a special exception) from the year of residence according to the balance of the mortgage loan at the end of the year.

Individuals who build a new house or acquire a house that has never been used after its construction are eligible for the special deduction for housing loans if all of the following requirements are met.

If you own more than one dwelling for residential use, the deduction is limited to one dwelling only.

（1）The property must be used as a residence within six months of the date of construction or acquisition and must be lived in continuously until 31 December of each year to which it applies.

（2）The total income of the taxpayer for the year in which the special exemption is granted must not exceed 30 million yen.

（3）The floor area of the newly built or acquired residence must be 50 square metres or more, and at least half of the floor area must be used exclusively for personal residence.

The criteria for determining the floor area in this case are as follows：

a. The floor area shall be judged by the floor area indicated in the register.

b. In the case of condominiums, the floor area is determined by the floor area of the exclusive use portion in the register, not including the portion used for common use (common area) such as stairs and passageways.

c. If the house is used as a shop or office, the floor area of the whole building including the shop or office will be used.

d. If a house is co-owned by a husband and wife or parent and child, the floor area is not multiplied by the co-ownership percentage, but by the floor area of the whole building including the co-ownership percentage of other people.  
However, in the case of a house in which a part of the building is owned separately, such as a condominium, the floor area of the separately owned part (exclusive use part) is used to determine the floor area.

（4）There are certain loans or debts for the construction or acquisition of a new house that are to be repaid in installments over 10 years or more (including loans for the acquisition of land, etc. to be used for the site of the house to be acquired together with the house). However, in the case of a loan from an employer, a loan with no interest or an interest rate of less than 0.2% (1% in the case of a loan to be used as a residence before December 31, 2016) does not qualify as a loan for this special deduction. In addition, all loans from relatives and acquaintances do not qualify for this special deduction.

（5）If a person receives the special treatment for transfer during a period of five years, including the year when the person started to live in the new house and two years before and after that, the person will not be able to apply for the mortgage deduction for the new house.

（note） special treatment for transfer
Special treatment for transfer refers, for example, to the following three cases. (i) special provisions for taxation of long-term transfer income (special provisions for reduced tax rate), (ii) Special exemption for income from the transfer of residential property (special exemption of 30 million yen), (iii) Special exemption for the replacement or exchange of specified residential property.

The deduction period and the amount of deduction for the special housing loan deduction

The deduction period and the amount of deduction for the special housing loan deduction are as follows for a person who buys a house and moves in between January and December 2021 1st to 10th year:
The deduction is calculated as follows:

balance at the end of the year x 1% (the maximum deduction amount is 400,000 yen)/per year