TAX & GOVERNMENT
8% vs Graduated Tax Calculator (Self-Employed PH 2026)
Every Filipino freelancer, sole-prop, and professional must choose between the 8% flat tax or graduated income tax annually. This calculator tells you which one saves more — with exact peso amounts under TRAIN Law brackets.
Your business numbers
Total revenue from freelance work, consulting, sales, or professional fees. Must be ≤ ₱3M to qualify for the 8% option (VAT threshold).
OSD = Optional Standard Deduction. Auto-deducts 40% of gross. No receipt tracking. Itemized requires you to list expenses with receipts.
Your annual government contributions. Self-employed at max MSC (₱35K) pays ~₱53K SSS + ~₱24K PhilHealth + ₱2.4K Pag-IBIG = ~₱79K/yr. At ₱20K MSC ~₱36K/yr.
Affects which BIR forms to file (1701 vs 1701A vs 1701Q).
Which option wins?
Recommended Option
8% Flat Tax
Saves you ₱32,500/year
8% Option Breakdown
Gross sales₱1,000,000
Less: ₱250K tax-free−₱250,000
Taxable base₱750,000
× 8% flat rate₱60,000
Percentage tax₱0 (included)
Total tax owed (8%)₱60,000
Graduated Option Breakdown
Gross sales₱1,000,000
Less: deductions−₱400,000
Less: SSS/PHIC/HDMF−₱36,000
Taxable income₱564,000
Income tax (TRAIN brackets)₱55,300
Percentage tax (3% × gross)₱30,000
Total tax owed (graduated)₱85,300
TRAIN Law Income Tax Brackets (2026)
Annual Taxable Income
Rate
Tax Formula
₱0 – ₱250,000
0%
Tax-exempt (no income tax)
₱250,001 – ₱400,000
15%
15% of excess over ₱250,000
₱400,001 – ₱800,000
20%
₱22,500 + 20% of excess over ₱400,000
₱800,001 – ₱2,000,000
25%
₱102,500 + 25% of excess over ₱800,000
₱2,000,001 – ₱8,000,000
30%
₱402,500 + 30% of excess over ₱2,000,000
Over ₱8,000,000
35%
₱2,202,500 + 35% of excess over ₱8,000,000
How the 8% option works
Under RA 10963 (TRAIN Law), self-employed individuals with gross sales ≤ ₱3M can elect the 8% flat tax in lieu of graduated rates AND percentage tax.
- Base: Gross sales/receipts MINUS ₱250,000 tax-free
- Rate: 8% flat (no brackets)
- Excludes: SSS/PhilHealth/Pag-IBIG cannot be deducted
- Replaces: Both income tax AND 3% percentage tax
- Election: Make it on BIR Form 1701Q (quarterly) at start of year, or 2551Q
Best for: Service businesses with high margins (freelancers, consultants, online workers) where expenses are minimal.
How the graduated option works
The default option uses TRAIN brackets on your NET income after deductions:
- Choice of deduction: 40% OSD (no receipts) OR itemized (with receipts)
- Plus SSS/PHIC/HDMF are deductible
- Income tax per TRAIN brackets above
- Plus 3% percentage tax on gross (unless VAT-registered)
- File quarterly on BIR Form 1701Q + annual 1701/1701A
Best for: Businesses with high expenses (₱40%+ of gross), or those with mixed compensation income (paid employee + side hustle).
When 8% wins
- High-margin services: Freelance dev, designer, virtual assistant, online tutor
- Low actual expenses (below 40% of gross)
- You don’t want to track receipts for itemized deductions
- Gross ≤ ₱3M: 8% only available below VAT threshold
- You want simpler filings: No need to file separate percentage tax form
When graduated wins
- High expenses: Brick-and-mortar with rent + utilities + staff (often above 40% of gross)
- Big asset purchases: Equipment, vehicles depreciable as expenses
- Mixed income: You also receive employee compensation (consolidate income tax)
- Below ₱250K gross: Tax-free under graduated, but you’d STILL owe 8% on (gross − ₱250K) = ₱0 — tie
- Above ₱3M gross: 8% not available, must use graduated
Disclaimer
Estimates use TRAIN Law brackets (RA 10963) and BIR Revenue Regulations. Actual tax may vary based on your specific deductions, additional surcharges, withholding tax credits, and changes in BIR rulings. The 8% election must be made within the first quarter of the taxable year — once you file with the graduated option, you cannot switch mid-year. Always consult a licensed CPA or BIR-accredited tax practitioner before making your annual choice. CalculatorsPH is not a substitute for professional tax advice.