Quick answer: The Philippines taxes income on a graduated scale under the TRAIN law. The first ₱250,000 of annual taxable income is tax-free; above that, rates run from 15% to 35%. Your SSS, PhilHealth and Pag-IBIG contributions and your 13th month pay (up to ₱90,000) are excluded before tax is computed. A ₱30,000 a month employee pays roughly ₱12,090 a year. Compute your income tax →
Who pays income tax in the Philippines
Income tax applies to anyone earning money in the Philippines, but the first ₱250,000 of taxable income each year is exempt, so many workers pay little or nothing.
- Employees are taxed on salary. The employer withholds tax every payday and reports it on BIR Form 2316.
- Self-employed individuals and professionals (freelancers, doctors, consultants, online sellers) pay tax on business or professional income, either at the graduated rates or the 8% option.
- Mixed-income earners have a salary plus a sideline and must file their own return.
- Minimum wage earners are exempt on their statutory minimum wage and the related holiday, overtime, night shift and hazard pay.
- Overseas Filipino workers whose pay is earned abroad are generally not taxed in the Philippines on that foreign income.
The 2026 income tax rates
These graduated rates have applied since 2023 and are unchanged for 2026:
| Annual taxable income | Rate on the slice |
|---|---|
| Up to ₱250,000 | 0% |
| ₱250,000 to ₱400,000 | 15% |
| ₱400,000 to ₱800,000 | 20% |
| ₱800,000 to ₱2,000,000 | 25% |
| ₱2,000,000 to ₱8,000,000 | 30% |
| Above ₱8,000,000 | 35% |
The rate applies only to the slice of income inside each bracket, so earning one peso more never reduces your take-home pay. The exact fixed amounts per bracket, plus the daily, weekly, semi-monthly and monthly withholding tables, are on the Tax Table 2026 page.
What counts as taxable income
For an employee, taxable income is not the full salary. Several items come off first:
- SSS, PhilHealth and Pag-IBIG contributions. Your employee share is exempt.
- 13th month pay and other benefits. Exempt up to a combined ₱90,000 a year. Read is 13th month pay taxable.
- De minimis benefits. Rice subsidy, uniform, medical and similar perks are tax-free within their limits. The limits went up in January 2026, see the de minimis benefits list.
- Separation pay and retirement benefits that qualify under the law.
Taxable income = gross compensation − contributions − exempt benefitsWhat a typical employee pays
The table shows full-year employees with 2026 SSS, PhilHealth and Pag-IBIG deductions. The 13th month pay is exempt at these levels except where noted.
| Monthly salary | Taxable income per year | Income tax per year | Effective rate on gross |
|---|---|---|---|
| ₱20,000 | ₱219,600 | ₱0 | 0% |
| ₱30,000 | ₱330,600 | ₱12,090 | 3.4% |
| ₱35,000 | ₱386,100 | ₱20,415 | 4.9% |
| ₱60,000 | ₱678,600 | ₱78,220 | 10.9% |
| ₱100,000 | ₱1,146,600 | ₱189,150 | 15.8% |
A ₱20,000 earner pays nothing because taxable income stays under ₱250,000. At ₱100,000 a month, the 13th month pay of ₱100,000 is ₱10,000 above the ceiling, adding ₱2,500 of tax at the 25% rate. For the step-by-step method, read how to compute income tax.
Worked example: ₱30,000 a month
Gross yearly salary ₱360,000
Less contributions (₱2,450 × 12) − ₱29,400
Taxable income ₱330,600
Tax = 15% × (₱330,600 − ₱250,000) = ₱12,090 per yearThat is about ₱1,007 a month. Your employer actually withholds ₱1,007.55 a month using the BIR table, so the year works out almost exactly. The Income Tax Calculator does this for any salary.
The 8% option for freelancers
Self-employed individuals and professionals with gross receipts of ₱3,000,000 or less can pay a flat 8% on gross receipts above ₱250,000, instead of the graduated rates and the 3% percentage tax. On ₱600,000 of receipts that is ₱28,000 against ₱62,500 under the graduated rates when expenses are small. Expenses cannot be deducted under 8%, so freelancers with high costs should compare both. If you have a salary too, the ₱250,000 deduction is not available on the 8% base. The calculator compares both methods.
Withholding tax and the year-end adjustment
You do not pay the annual tax in one go. Your employer withholds it each payday using the withholding tax table, then reconciles it with the real annual tax in December. If too much was withheld you get a refund; if too little, the difference is deducted. Use the Withholding Tax Calculator to see both.
Filing and deadlines
Employees with one employer and correctly withheld tax are covered by substituted filing: no return to file. The self-employed, mixed-income earners and employees with two or more employers file their own annual return by April 15, and freelancers also file quarterly returns. Details are in the income tax return guide.
Common mistakes
- Computing tax on gross salary. Contributions and exempt benefits come off first.
- Adding the 13th month pay to the salary. It is exempt up to ₱90,000.
- Assuming the 35% rate applies to everything. Each rate applies only to the slice in its bracket.
- Choosing 8% automatically. It is not always cheaper if your business expenses are large.
- Ignoring a previous employer. Changing jobs mid-year means filing your own return unless the new employer annualizes both incomes.
Related guides
- Tax Table 2026: all BIR tables →
- How to compute your income tax step by step →
- How withholding tax works →
- BIR Form 2316 explained →
- Income tax return guide →
Source: Bureau of Internal Revenue (BIR), RA 10963 (TRAIN), RR 11-2018 and RR 29-2025. Last checked 17 October 2026. This guide is an explainer only; confirm your situation with the BIR or a tax professional.