“If someone dies holding appreciated crypto assets, inheritance and income taxes combined can reach approximately 110%.” You may have been surprised to see this explanation.

This “approximately 110%” meansadding the maximum inheritance tax rate of 55% to the maximum combined income and resident tax rate of 55%. The latter comprises 45% income tax and 10% resident tax, excluding the Special Income Tax for Reconstruction.

Under certain combinations of circumstances, selling inherited assets may not generate enough proceeds to cover both inheritance tax and tax on the sale. However,the overlap between inheritance tax and income taxation of gains accrued during the deceased's lifetime is not unique to crypto assets.It also occurs with shares, real estate, and gold.

However, a shared mechanism does not imply identical tax rates. Let us first clarify what “110%” means, then examine differences between assets.

Death alone does not trigger both taxes simultaneously

First, assets acquired by inheritance raise inheritance tax issues. However, ordinary inheritance itself does not impose income tax on all unrealized gains in crypto assets. The issue ariseswhen the heir subsequently sells the crypto assets. This includes selling them to pay inheritance tax.

The acquisition cost used to calculate sale gains is not automatically reset to market value at inheritance. For crypto assets, the NTA's FAQ on “Acquisition Cost of Crypto Assets” states that the amount valued at the deceased's death using their chosen valuation method is carried over. This is the succession to cost for income calculation purposes, distinct from market valuation for inheritance tax.

For example, suppose the deceased acquired crypto assets for JPY100 million, their inheritance tax value was JPY2 billion, and the heir sold them for the same JPY2 billion. Even without any appreciation after inheritance, the income calculation generally leaves a JPY1.9 billion gain.The heir inherits both the asset and the income tax burden embedded in it.

Both maximum rates are 55%: What is the actual burden?

Inheritance tax and the combined income and resident taxes under aggregate taxation each have a maximum rate of 55%. For assets with large unrealized gains, taxation of their value at inheritance and of gains on their subsequent sale can be substantial.

However, inheritance tax is calculated on the assessed value of inherited assets and related amounts, while income taxes on sale are calculated on gains after acquisition costs and necessary expenses. Each tax has its own deductions and rate structure.Simply adding the maximum rates gives neither every heir's effective tax burden nor a precise upper limit.

Nevertheless, calculations can produce a burden exceeding the asset's value. The following is an illustration of the mechanism, not an actual tax return case.

Assume one adult child inherits everything, with no other estate assets, debts, funeral expenses, lifetime gifts added back, tax credits, or similar items. The heir's other income, necessary expenses, income deductions, and per-capita resident tax are omitted. No income tax basic deduction is available at this income level. Including the Special Income Tax for Reconstruction for 2026, the total is approximately JPY2,066,260,000, or 103.3%. For rates and quick-calculation deductions, see NTA: Inheritance Tax Rates and Income Tax Rates. Resident tax uses the Local Tax Act's standard rates.

There is also an accepted treatment allowing acquisition cost for crypto assets to be set at 5% of sale revenue. This cannot be ignored when discussing a maximum burden based on zero acquisition cost. The example above sets acquisition cost at 5% of sale proceeds (Income Tax Basic Circular 48-2-4）。

Shares and real estate also carry over gains accrued during the deceased's lifetime

The same can happen with shares acquired cheaply when a company was founded or land bought long ago. Paying inheritance tax does not automatically step up the acquisition cost used on sale to the inheritance tax value. In an ordinary inheritance, Article 60 of the Income Tax Act generally provides for carrying over the deceased's acquisition cost and acquisition date.

However, ordinary gains on shares and long-term gains on land and buildings are subject to separate taxation at rates lower than aggregate taxation.Although inheritance tax and income taxation overlap in both cases, this does not mean shares are uniformly subject to “110%.”

This compares ordinary rates for 2026. Exceptionally large income from shares and similar assets also requires checking the special minimum-tax-burden rules. This is not a table of final effective burdens taking account of inheritance tax valuations, deductions, gains and losses, or price movements after inheritance. Sources: NTA guidance on Capital Gains on Shares and Similar Assets and Long-Term Capital Gains on Land and Buildings and Short-Term Capital Gains。

Gold and business inventory can also involve overlapping aggregate taxation

When gold bullion is sold, gains are normally subject to aggregate taxation as capital gains. Short-term gains on holdings of 5 years or less do not receive the half-inclusion treatment available for long-term gains. If the holding remains short-term even after carrying over the deceased's acquisition date, and no addition to acquisition cost is available, high aggregate tax rates and inheritance tax can overlap as with crypto assets. However, items such as the JPY500,000 special deduction mean the tax amounts are not simply identical.

Likewise, when a sole proprietorship is inherited and inventory held by the deceased is sold, its cost for income tax purposes is not automatically reset to its selling price at inheritance (Article 103(2)(i) of the Order for Enforcement of the Income Tax Act). If the profit is business income, aggregate taxation applies. However, inheritance tax valuation of inventory deducts an appropriate profit margin, estimated expenses, and similar items from the selling price, so the inventory valuation rules must also be considered.

A major difference: Adding inheritance tax to acquisition cost

For capital gains on shares, real estate, and similar assets sold within a specified period, a certain amount of inheritance tax may be added to acquisition cost. This reduces the sale gain and mitigates the overlapping burden.

NTA: Special Acquisition Cost Rules When Inherited Assets Are Sold explains that this applies to capital gains. The sale deadline is usually approximately 3 years and 10 months after inheritance begins. Strictly, the statutory period runs from the inheritance tax filing deadline, and the full inheritance tax amount is not unconditionally deductible.

Therefore,this addition to acquisition cost does not apply to crypto asset gains classified as miscellaneous income or to inventory sales classified as business income.When considering the crypto asset issue, examine not only high maximum rates but also the unavailability of this adjustment because of the income classification.

What changes under the 2026 reform, and what issues remain?

The NTA's explanation of the 2026 tax reform sets out separate taxation by return at 20% (15% income tax and 5% resident tax, excluding surtaxes) for certain crypto assets sold to specified dealers and similar transactions, together with changes concerning capital gains on crypto assets. Application begins on January 1 of the year following the year in which the related amendments to the Financial Instruments and Exchange Act and other legislation take effect. This does not mean a uniform 20% rate began on publication of the tax reform legislation.

The aggregate-taxation illustration in this article cannot simply be applied to eligible transactions after the reform takes effect. For transactions classified as capital gains, the relationship with the addition to acquisition cost must also be reconsidered. It is likewise inappropriate to assume that all crypto assets will always produce miscellaneous income with no inheritance tax adjustment.

Consider not only inheritance tax, but what remains after liquidation

The “approximately 110%” discussion about crypto assets brought the issues embedded in inheriting appreciated assets into clear focus. However, the structure of taxing both asset value at inheritance and gains calculated using the deceased's carried-over cost has long existed.

The legal question of whether the same taxable object is taxed twice should be distinguished from the tax burden heirs actually bear. With that distinction in mind,when considering tax policy, we should examine the combined burden of inheritance tax and income taxation on liquidation, and how to adjust it, rather than focusing solely on asset labels.

Inheritance planning also requires more than calculating inheritance tax. Check the deceased's acquisition cost, who inherits, when assets will be sold, the applicable income classification, and special provisions, and calculate how much cash remains after liquidation.