The government and the ruling coalition are planning to extend a tax break system for people who renovate their homes, sources familiar with the matter said. The home renovation tax relief is set to expire at the end of this year but government and ruling coalition officials are considering keeping it in place until the end of 2023, the sources said.

The decision to extend the program is aimed at promoting sales of used homes amid a spike in vacant homes across the country. Under the tax breaks, people who renovate to make their homes energy-efficient, barrier-free or resistant to earthquakes are eligible for income tax deductions. A portion of loans taken to finance renovations are deducted from income tax, while for self-financed renovations, part of the construction costs are tax-deductible.

For renovations meeting certain requirements, 2% of year-end outstanding loans, or up to ¥250,000, can be deducted from income tax for five years. A 1% deduction for loans of up to ¥10 million is available for other renovation work. For self-financed renovations, 10% of the construction costs can be deducted from income tax, or up to ¥500,000 for homes meeting all requirements ranging from earthquake resistance and energy efficiency to durability.

Government officials are also considering easing the requirements for tax cuts related to insulation-related renovations that make homes more energy-efficient. A plan under consideration calls for requiring people to only replace some of their windows to improve insulation, instead of all windows as is currently required. The move is aimed at promoting energy-efficient homes that do not require the heavy use of air conditioners.