Tax Guide
How to Compute Income Tax in the Philippines (2026 Guide)
A simple guide to understanding how income tax works and how to compute what you owe.
Taxes can be confusing. But they don't have to be. This guide will help you calculate your income tax in the Philippines using simple terms and real examples you can actually understand.
This article is mainly a simplified guide for employees earning compensation income. If you are self-employed, a professional, or a mixed-income earner, different rules and options may also apply, so treat this as a starting point rather than a full tax manual.
How Income Tax Works in the Philippines
Since the TRAIN law took effect in 2018, calculating income tax has become much simpler. The government uses a tax bracket system, which means the more you earn, the higher percentage you pay, but only on the amount that falls into each bracket.
Here is a simple way to see it: If you earn ₱30,000 per month, you don't pay 20% on the entire amount. You pay 0% on the first ₱20,833, and 15% only on the amount above that.
The 2026 Income Tax Table
Here's the current tax table for individual taxpayers:
| Annual Income | Tax Rate |
|---|---|
| ₱250,000 and below | 0% (Tax-free!) |
| ₱250,001 to ₱400,000 | 15% of excess over ₱250,000 |
| ₱400,001 to ₱800,000 | ₱22,500 + 20% of excess over ₱400,000 |
| ₱800,001 to ₱2,000,000 | ₱102,500 + 25% of excess over ₱800,000 |
| ₱2,000,001 to ₱8,000,000 | ₱402,500 + 30% of excess over ₱2,000,000 |
| Above ₱8,000,000 | ₱2,202,500 + 35% of excess over ₱8,000,000 |
Real Examples
Example 1: Juan earns ₱20,000 per month
Annual income: ₱20,000 × 12 = ₱240,000
Since ₱240,000 is below ₱250,000, Juan pays ZERO income tax.
Example 2: Maria earns ₱30,000 per month
Annual income: ₱30,000 × 12 = ₱360,000
Maria falls into the second bracket (₱250,001 to ₱400,000).
- Taxable amount: ₱360,000 - ₱250,000 = ₱110,000
- Tax: ₱110,000 × 15% = ₱16,500 per year
- Monthly tax: ₱16,500 ÷ 12 = ₱1,375
Example 3: Pedro earns ₱50,000 per month
Annual income: ₱50,000 × 12 = ₱600,000
Pedro falls into the third bracket (₱400,001 to ₱800,000).
- Base tax: ₱22,500
- Excess over ₱400,000: ₱600,000 - ₱400,000 = ₱200,000
- Tax on excess: ₱200,000 × 20% = ₱40,000
- Total annual tax: ₱22,500 + ₱40,000 = ₱62,500
- Monthly tax: ₱62,500 ÷ 12 = ₱5,208
What About 13th Month Pay and Bonuses?
Good news! Your 13th month pay and other benefits up to ₱90,000 are tax-free. Only the amount above ₱90,000 gets taxed.
What If You Are Not a Regular Employee?
If you earn from business, freelancing, or professional practice, your tax computation may not follow the same simplified compensation-income examples shown above. Depending on your registration and income type, you may fall under different treatment, including graduated rates or other applicable rules. That is one reason it helps to verify your exact taxpayer classification before relying on a generic example.
What Usually Reduces Your Taxable Pay?
For most employees, the biggest items that affect taxable pay are mandatory government contributions and the tax-exempt portion of benefits. The most common examples are:
- SSS, PhilHealth, and Pag-IBIG contributions – These are automatically deducted
- 13th month pay and other benefits – Tax-free up to the current exempt threshold
- Non-taxable allowances and compensation items – Depending on how your employer classifies them
Use Our Tax Calculator
Don't want to do the math yourself? Use our free tax calculator for a quick estimate. It is useful for planning, but official withholding and filing outcomes can still vary depending on your actual compensation structure and taxpayer category.
Key Takeaways
- If you earn ₱20,833 or less per month, you don't pay income tax
- The tax system uses brackets, so you only pay higher rates on the amount in each bracket
- Your 13th month pay is tax-free up to ₱90,000
- Mandatory contributions and non-taxable benefits can reduce your taxable pay
Understanding your taxes helps you plan better and avoid surprises. For important filing or compliance decisions, verify details with official BIR guidance or a qualified tax professional.