BIR Income Tax Calculator 2026 (TRAIN Law)
Compute your Philippine income tax under the TRAIN Law for employees, self-employed, and mixed-income earners. Includes 8% option, mandatory contributions, and take-home pay estimate.
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Your income tax
How Philippine income tax works under TRAIN Law
The Philippine income tax system uses progressive tax brackets — the more you earn, the higher percentage you pay on the income above each threshold. The Tax Reform for Acceleration and Inclusion (TRAIN) Law (RA 10963) sets the current bracket structure, which became fully effective in 2023.
Filipinos earning ₱250,000 or less per year (about ₱20,833/month) pay zero income tax. Income above this exempt threshold is taxed progressively up to 35% for the highest earners.
2026 BIR income tax brackets (annual)
| Annual Taxable Income | Tax Rate | Tax Formula |
|---|---|---|
| ₱0 – ₱250,000 | 0% | Exempt |
| ₱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 |
2026 BIR monthly withholding tax brackets
For employees, employers withhold tax monthly using the same brackets divided by 12. Here’s the equivalent monthly table:
| Monthly Taxable Income | Tax Rate | Withholding Tax |
|---|---|---|
| ₱0 – ₱20,833 | 0% | None (exempt) |
| ₱20,834 – ₱33,333 | 15% | 15% of excess over ₱20,833 |
| ₱33,334 – ₱66,667 | 20% | ₱1,875 + 20% of excess over ₱33,333 |
| ₱66,668 – ₱166,667 | 25% | ₱8,541.80 + 25% of excess over ₱66,667 |
| ₱166,668 – ₱666,667 | 30% | ₱33,541.80 + 30% of excess over ₱166,667 |
| Over ₱666,667 | 35% | ₱183,541.80 + 35% of excess over ₱666,667 |
The 8% option for self-employed Filipinos
If you’re self-employed, a freelancer, or a professional with annual gross sales/receipts of ₱3,000,000 or less, you can choose the 8% flat tax option instead of the graduated rates. Under this option:
- You pay 8% of gross sales/receipts in excess of ₱250,000
- This 8% covers both income tax AND the 3% percentage tax (no separate percentage tax filing)
- No deductions for business expenses are allowed
- You must elect this option in your first quarter BIR filing (1701Q) each year
- Once elected, you can’t switch back to graduated rates until the following taxable year
The 8% option is usually better for service-based freelancers with low overhead (writers, consultants, designers, online sellers without large inventory). The graduated rates with itemized deductions usually favor businesses with significant operating expenses.
How taxable income is computed (employees)
− SSS employee contribution (5% of MSC, max ₱1,750/mo)
− PhilHealth employee contribution (2.5% of salary, capped at ₱2,500/mo)
− Pag-IBIG employee contribution (2% of salary, capped at ₱200/mo)
− 13th month pay & other benefits (up to ₱90,000 exempt)
= Taxable compensation income
Apply tax bracket → Annual income tax
Divide by 12 → Monthly withholding tax
Sample computations
Example 1: Employee earning ₱25,000/month
- Annual gross: ₱300,000
- SSS (₱25K MSC × 5% × 12): ₱15,000
- PhilHealth (₱25K × 2.5% × 12): ₱7,500
- Pag-IBIG (₱200 × 12): ₱2,400
- Total contributions: ₱24,900
- Taxable income: ₱275,100
- Tax (15% × ₱25,100): ₱3,765/year ≈ ₱314/month
Example 2: Employee earning ₱60,000/month
- Annual gross: ₱720,000
- SSS (₱35K MSC max × 5% × 12): ₱21,000
- PhilHealth (₱60K × 2.5% × 12): ₱18,000
- Pag-IBIG: ₱2,400
- Total contributions: ₱41,400
- Taxable income: ₱678,600
- Tax: ₱22,500 + 20% × (₱678,600 − ₱400,000) = ₱78,220/year ≈ ₱6,518/month
Example 3: Freelancer earning ₱1,200,000/year (8% option)
- Gross sales: ₱1,200,000
- Exempt: ₱250,000
- Taxable: ₱950,000
- Tax: 8% × ₱950,000 = ₱76,000/year
- No additional percentage tax due (covered by the 8%)
Frequently asked questions
Anyone earning ₱250,000 or less in annual taxable income (after mandatory contributions and exempt benefits) pays zero income tax. For employees, this works out to about ₱20,833 monthly gross before deductions. Minimum wage earners are also fully tax-exempt regardless of overtime or holiday pay.
13th month pay and other employee benefits (like Christmas bonus, productivity incentives, performance bonuses) are tax-exempt up to a combined total of ₱90,000 per year. Anything above ₱90,000 is added to your taxable income and taxed at your regular bracket rate.
The 8% option is usually better if your business expenses are low (typically under 40% of gross income). For service-based freelancers, consultants, online sellers, and professionals with minimal overhead, 8% usually results in lower total tax. For businesses with significant inventory costs, employee salaries, or office expenses, graduated rates with itemized deductions usually win. Run both scenarios before electing.
The top marginal rate is 35%, which applies only to annual taxable income above ₱8,000,000. Even high earners only pay 35% on the portion above that threshold — everything below is taxed at lower bracket rates.
Annual income tax returns (BIR Form 1700 for employees, 1701 for self-employed) are due on or before April 15 each year. For self-employed and mixed-income earners, quarterly returns (1701Q) are due 60 days after each quarter ends: May 15, August 15, November 15, and April 15 for the final quarter.
No. Income earned abroad by overseas Filipino workers (OFWs) and overseas contract workers (OCWs) is exempt from Philippine income tax. However, OFWs must still file BIR forms to declare their OFW status. Income earned within the Philippines (e.g., rental income, business income) remains taxable.
Yes. Your share (employee portion) of all three mandatory contributions is deducted from your gross income before computing income tax. This reduces your taxable base and the resulting tax. The employer share is paid by your employer and doesn’t affect your taxable income.
The BIR imposes a 25% surcharge plus 12% annual interest on unpaid taxes, plus a compromise penalty depending on the amount. Failure to file can also lead to criminal charges in severe cases. Always file even if you owe nothing — the penalty for late filing exists even when no tax is due.