What are the deductions and exemptions you can claim against your taxable income in computing income tax and preparing your annual tax return? The computation for income tax expense and payable for individuals and corporations (including taxable partnerships) differs. Individual taxpayers can claim personal and additional exemptions that reduce their total taxable income while corporations, which are not natural persons, obviously cannot. Furthermore, income tax rate on individuals are graduated (progressive), while the corporation income taxes (regular corporate income tax and minimum corporate income tax) are computed at fixed rates. If you are on your way now to computing your income to be filed and remitted with the BIR, the following deductions and exemptions may reduce your taxable income, and thereby also reducing your income tax.
What are allowable deductions from gross income?
1. Optional Standard Deductions. Both individual taxpayers and corporations have the option to claim optional standard deductions (OSD in lieu of itemized deductions. The following are OSD for individuals and corporations:
a. OSD for individual
For individual taxpayers, a maximum of 40% of their gross sales or gross receipts shall be allowed as deduction instead of the itemized deduction. This type of deduction shall not be allowed for non-resident aliens engaged in trade or business.
b. OSD for corporations
RA 9504, which was approved effective July 2008, gives corporate taxpayers an option to claim optional standard deduction (OSD) instead of itemized deductions. OSD is equivalent to 40% of gross income. Once the option to use OSD is made, it shall be irrevocable for the taxable year for which the option was made. A corporation who availed and claimed this deduction is still required to submit its financial statements when it files its annual tax return and to keep such records pertaining to its gross income.
2. Itemized deductions. These deductions from gross income include all ordinary and necessary trade and business expenses paid or incurred during the taxable year in carrying on or which are directly attributable to the development, management, operation and/or conduct of the trade and business. Itemized deductions include the following:
a) Expenses
b) Salaries
c) Interest *
d) Travel
e) Rental expenses
f) Entertainment expenses *
g) Taxes *
h) Losses
i) Bad Debts *
j) Depreciation
k) Depletion of Oil and Gas Wells and Mines
l) Charitable Contributions and Other Contributions *
m) Research and Development
n) Pension Trusts
o) Premium payments on health/ or hospitalization insurance *
p) and other expenses that may be allowed as itemized deductions by the NIRC
Important Note: Certain expenses, such as interest, bad debts, taxes, entertainment and other expenses have been set with limitations and exemptions in claiming as deductions against the taxable income. To learn more on the limitations, tax arbitrage and exemptions on those expenses, please read our article “ allowable deductions in the Philippines”. Premium payment on health and/or hospitalization insurance of an individual taxpayer, including his family, in the amount of P= 2,400 per year, per family, may be deducted from his gross income: Provided, that said taxpayer, including his family, has a yearly gross income of not more than P= 250,000. In case of married taxpayers, only the spouse claiming the additional exemption for dependents shall be entitled to this deduction.
Personal and Additional Exemptions
As discussed earlier, individual taxpayers may claim personal and addition exemptions as follows:
1. Personal exemption
For single individual or married individual judicially decreed as legally separated with no qualified dependents………………………………………P 50,000.00
For head of family……………………………P 50,000.00
For each married individual *…………P 50,000.00
Note: In case of married individuals where only one of the spouses is deriving gross income, only such spouse will be allowed to claim the personal exemption.
2. Additional exemption.
For each qualified dependent, a P25,000 additional exemption can be claimed but only up to 4 qualified dependents. The additional exemption can be claimed by the following:
- The husband who is deemed the head of the family unless he explicitly waives his right in favor of his wife
- The spouse who has custody of the child or children in case of legally separated spouses. Provided, that the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions allowed by the Tax Code.
- The individuals considered as Head of the Family supporting a qualified dependent
Note: Dependent Child” means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.
Disclaimer: This article was published for informational use only. New laws, BIR issuances, regulations and rulings may render this post obsolete or incorrect in part or in full. For more information, please visit the BIR website or office for more information.
Victorino Q. Abrugar is a marketing strategist and business consultant from Tacloban City, Philippines. Vic has been in the online marketing industry for more than 7 years, practicing problogging, web development, content marketing, SEO, social media marketing, and consulting.
first time to hear about optional standard deduction. i really should brush up on my accounting
Hello Victorino,
Is it possible for an employee to avail of tax deductions such as Charitable Contributions and Other Contributions? If so, how? Thanks!
Regards,
John
Sir for example i have 6 children
maximum of 4 qualified dependents right?
what if my 1st dependent is not qualified anymore, but my 5th child is
can i register/avail my 5th child as my 4th dependent since my 1stdep is not qualified anymore?
Thanks sir!
Hi, Mel, I would like to help you with that.
Based on R.A. 9504 regarding “Change of Status”, you may still avail the additional exemption of P25,000 for your child whom you referred to as “not qualified anymore” ONLY for the taxable year within which your child has become “unqualified” (For example:
Your child became 22 years old during this year [unless he is physically or mentally defect that he is incapable of supporting himself], you may still claim the P25,000 additional exemption for this taxable year ONLY {as if your child became unqualified at the end of the year}. Thus, in your case you have 6 children, you may only avail P100,000 total additional exemptions since the maximum number of dependents is 4.
Furthermore, for the next taxable year, you may no longer claim the additional exemption of P25,000 relating to your first child BUT you may still claim the additional exemption of P25,000 relating to your 5th child [if he is qualified] since the maximum number of qualified dependents for each taxable year is 4. )
I hope my answer helps. 😉
Yes you can since you have a maximum of 4 qualified dependent children to claim.
Hello Sir,
We are 13 in the Family.I am 10th child of my father & mother, 9 of my brothers & sisters are married,my youngest brother and I are not.My father is paralized and my Mother is not cosidered as employed they are the same 60 years old above.,Can i cailm them as Additional Exemption?
What is the status of a child if he turns 22 in July 2012? Is he still part of an additional deduction for that year or not anymore? What if he turns 22 on May 2012, is he still part of the additional exemption?
Sir, I am not married but I have a daughter whose surname is thru his father. BIR is asking me for a waiver. The father of my kid has abandoned us na and I don’t have any way of contacting him. I don’t know if he is still in the Philippines or where ever because he has changed his number and address. Ano kaya ang gagawin ko para ma-declare ko as dependent ang anak ko in lieu of the waiver?I have a solo parent ID pero waiver pa din ang hinahanap sa akin ng BIR 043A branch. Please give me advise. Thank you in advance.
sir, i had submitted my bir form 2305 and i did not fill up the space providing my husband’s tin number and his employer, he was employed locally in one of the private schools here in our place but his employer did not applied him a tin number..a bir officer told me to submit my husband’s waiver.Unfortunately when i look for a sample of waiver it has stated there that both of us are taxpayers, how can i claim for additional exemptions for my children if he doesn’t have any tin number?
how can i claim for additional exemptions for my children if he doesn’t have any tin number? Unfortunately when i look for a sample of waiver it has stated there that both of us SHOULD BE taxpayers,
if the husband have no tin(presumably he is not employed) means the wife can claim the children as qualified dependents. the wife have to indicate that the spouse (husband) is unemployed in form 2305.
Hi Sir I am single but I am the head of my family. I am supporting my sister for her college. And my father and aunt for their daily living. Can I have tax deductions?
Pag breadwinner po ba puwede mag claim ng additional exemption. Kung idedeclare na dependents ang parents at kapatid na pinag-aaral? salamat po sa reply 🙂
No. You can only declare a dependent child as your additional exemption, subject to the provision of the tax code. The breadwinner status gives a taxpayer a “head of the family” status. However, today, single, married and head of the family taxpayers have all the same amount of personal exemption, that is, P50,000. For more questions, please visit our forums. http://www.businessforum.ph
My qualified dependent would turn 22 on December 2013. Can I still claim her as additional dependent since she is still 21 years old from Jan. to Nov?
Thanks
pls reply
Hello! Is allowance taxable income? How much percent?
hi, just want to know where to deduct PERSONAL EXEMPTION of 50k. Should I deduct it from Gross Income or from Net Income before tax or from Net Income after tax? I am on a proprietorship. thanks.
When making the article, please include the regulation no. issued for our reference
When is OSD deductible? My assignment..pls help me.
If my dependent turn 21 on Oct, in the year end computation, paano sya icompute? Is it for January na or for last qtr? how? Thanks for sa sagot..
please refer to RA 8424 section 35 paragraph C. i think the law says u can still claim the dependent for the whole year even if he/she turns 21 in any time of that year. which means u can no longer claim him/her as dependents for a certain year if he/she turns 22 for that year.
Just want to ask if I can include my one child as my dependent upon filing tax exempt even she is not bringing my family name? If yes, what are the documents to present, and how much is my tax exemption. Thank you
My daughter turned 22 years old last Sept 2014. Is she still part of my additional exemption for this 2014?
pls reply iam confused. my employer did not include my child to my exemption from 2014 just because she turned 22 in sept 2014
Your website provides more useful information than that of BIR. Keep up the good work. Why is the BIR making it so hard for us to file our ITR’s without an accountant?
Hello Sir, I am a Bi-:ingual Call Center agent in Manila and would like to ask if Language premium is considered as part of the salary or an allowance and if it is taxable. Thank you so much and hopefully you can answer my question.
Hi sir, I am a public school teacher with a salary of 18549. My husband has never been employed and I have 4 dependents. My co-tcher’s deduction is more than 500 but she has only 3 dependents. How come mine is stl almost 5h? Shouldn’t there be a bigger difference between our deductions?
question: I am a single with 1 daughter and meron din po ako solo parent id. yung tax ko po ba is same lang ng Single with or without dependent? or meron po iba calculation ung solo parent with dependent?
i have a disabled brother and he is the oldest. can i declare him? to
Yes po 🙂
Just want to ask how about if the husband or father of the child is not a filipino citizen and the mother is employed, is the mother can claimed the additional exemption? what is the documentary requirements?
Kindly reply thanks
Hi. Me and my husband are both taxpayers. He claims exemptions for our 2 kids. Im about to give birth for our 3rd child this month, can i claim for exemptions for our 3rd child?
hi, tanong lang sana ko re unmarried head of the family. i have a sister na mag 15 years old and mother na unemployed, 57 years old. are they qualified as my dependent?and anu ano pa ba ibang qualifications and steps na din po sa pag file nito?
thanks and God bless
qualified po kayo sa pag claim ng exemption,sa case nyo ang status mo S1, fill up ka ng 2305,attach mo yung solo parent id and birth certificate ng anak mo.
is the per family payment rate payment for the doctors at the lgu taxable
hello po. tanong ko lang po sir, puwede bang ideduct iyong P2400.00 sa mga punong barangay at kagawad na compensation ang treatment sa kanilang honoraria? Thanks.
G. Victorino, gusto ko po sanang magtanong sa inyo.
Kapag ang isang matandang lalaki po ba ay nakapangasawa ng biyuda na mayroong tatlong anak, at parehas po sila ng trabaho at gross annual income pero nagkakatalo sila sa mandatory deductions (Yung babae ay mayroong total mandatory deductions na mas malaki kaysa nung sa lalaki).
Kanino po mapupunta yung exemption status na: Married Employee with 3 dependent children? Sa lalaki po ba o sa babae? Maraming Salamat po.
my husband is an ofw and i will start to work, can i claim the tax deduction/exemption? what form/documents should i fill up and present? tnx
Hello, I am working in a religious non-profit organization which is tax exempt.. does that follow that we as employees be tax exempted too? thank you
hello,
please address my query, I am currently s4 single with four qualified dependent, im changing status to married thus this will change to married with 4 qualified dependents? how bout my coming 5th child? they are all minors. do I have to put the 5th child to my husbands exemptions?
thanks,
An
Only 4 dependents are qualified. Even if they are all minors, you can only claim additional exemptions for 100,000. And if you’re now married po, your husband can only claim for the exemptions because he is the husband. If he waived his right to you to claim exemptions, that’s only time you can claim it. Total claimable dependents are 4 for the whole family na po.
paano po yun stepchildren??
Hi!
My husband and I are already separated for almost 3 years but not legally. We have 2 children. The eldest is with his custody during weekdays but is with me during weekends and all other non school days. The second child is with me. I am not asking any support from him. He is claiming the tax exemption for our two children even though I am earning much more than what he earns. My question is that, can I possibly claim 1 child as my dependent since she is with me?
Di po kayo pwede mg claim or else he will fill up his “Waiver of Right to Claim of Exemptions, thats the only time that you claim excemption.
Hi,
Im new on an individual contractor agreement. I know i am liable to pay my SSS,philhealth and pagibig on my own. Are those included on the OSD? Or it’s the OSD plus those payments that i will dedict from my income?
Sir,
Good Day!
Ask ko lang po kung pwd iaplay sa computation or deduction ung cnasabi sa important note na “allowable deduction sa Pilipinas” na 2,400.00 kapag hindi umabot sa 250,000.00 gross ang sahod sa loob ng isang taon?
Salamat po!
Jack
Yung 250,000 po is total family income. Lahat po ng income ng pamilya mo ay i-aadd po. Example po, 100,000 income mo po, then sa asawa mo is 100,000 and may dependent children kayo na 2. 100,000+100,000=200,000. Ia-add po premium na binayaran ni’yo. Halimbawa, 5,000 po yung binayaran ni’yong premium health insurance, iadd ni’yo po sa 200,000 so 205,000 na po. Claimable po yung insurance premium pero 2,400 lang po ang pwede. Yung excess po ng insurance na binayaran ni’yo po, kasama po siya sa taxable income.
Ask ko lang po , yung insurance po ba na tinutukoy nyo is yun ba yung philhealth?
Sir,
Good Day!
I have some clarification re of tax computation, employed po ako w/ 17K basic salary, married w/ 4 dependents, ang tax ko po ay 344, tanong ko lang po kung hindi po pwd aplayan ng deminimis ung gross ko para mabawasan or wala na akong tax?
Salamat po!
jack
Hello po,
Ask ko lang po, ano po yung meaning ng “personal exemption” na P50,000.00? Is that mean na pag lumampas doon yung witholding na kinakaltas sayo you can apply for tax return? Please need your help and advice. Thanks.
I have basic income of 15,000 monthly, kinakaltas sa akin sa payroll is 1600 monthl, married with no qualified dependent. May makukuha ba ako na tax return, how to apply?
Hi Victorino.
What are the rules in enrolling your parents as dependents?
Thanks
good morning sir,
im currently working at a government institution here in our province in a job order status, on a 600+ per day, and i have 4 kids, can i avail the income tax exemption? how?
as far as i know, yes you qualified to avail the exemption since you are above minimum
Good Day!
Sir i would like to ask if the commission taxable? currently my company deducted us 32% saan po dapat kasama ang commission sa OSD or itemize deductions?
Thank You,
Sir tanong ko lang, Single Proprietor po ako, di po ba ako pdeng mag deduct sa sales na dineclare ko base sa expenses ko? sabi nila di daw pde kasi Single Prop lang ako… ganon po ba talaga?
Hi po. ask ko lang. pano po ang tax guideline ng Single with 2 qualified dependents? pano po ba ang sample ng computation kung may 3.8k akong non-taxable and 13,200 po akong taxable? 17k po kc yung complete package ng compensation ko. Please reply. thank you in advance.
Hi, I would like to ask, is it possible for me to remove any qualified dependents on my Income Tax Status so that their mother can claim the exemption? please note that we are not married, do we still need to file the waiver so that one of us can claim the tax exemption?
Your response will be highly appreciated.
Thank You.
Hi Carlo,
It is best to visit BIR in your RDO to ask for confirmation so you won’t have any problem in the future. Basically, there’s should be a waiver to waive rights for claiming tax exemption.
Paano ko makuha yong deduction ko starts july 2008 to August 2012 binabawasan ako sa sweldo ko more than halos isang libo kada sahod ,manila rate na assign ako gen trias cavite,.question bakit may tax deduction? Nada batas na All minimum wages are exempted na sa tax….di naman nagbabayad ang security agency ko, ma claim ko pa ba yong na deduct sa akin?…pls reply.
Hi,
Please ask from your employer BIR Form 2316, also called the Certificate of Compensation Payment or Income Tax Withheld. It is the evidence that they have really remitted to the BIR the tax they withheld from your salary. If there are over remittance, you are entitled for the refund.
Hi. Me and my husband are both taxpayers. He claims exemptions for our 2 kids. Im just gave birth for our 3rd child last month, can i claim for exemption just for our 3rd child provided with signed waiver of my husband?
Reply
Hi. I think it must be consistent. If the husband claimed your other 2 dependent children, then he might as well claim the new dependent. Please verify with the BIR officer in your RDO to make sure you are preparing/computation the right income tax payable.
HI po.. sir victorino ask ko lang po kung ung personal exemption po ay binabawas sa quarterly income tax, or sa annually? thanks po
Hello Shenn,
Personal exemptions are deducted in the annual income tax return, not on the quarterly ITR (1701Q). Also, if you are claiming Optional Standard Deduction, you must claim it from the first quarter throughout the year.
hi, are transpo paid to jeepneys and tricycle deductible? if yes, what will be the substantiation requirement?
also is accrual for pension and compromised penalty to bir, penalty for late payment to government agencies deductible?
Hi. Transpo paid to jeepneys and tricycle deductible can be documented with petty cash vouchers and liquidation papers. Penalties for late payments to gov’t agencies such as BIR are not usually deductible as taxes.
Hi
I do have question if my wife is not working my income tax do have deduction?
if yes what should i do?
Thanks
Hi. Generally, it’s the husband who will claim as additional deductions the eligible dependent child/children. So whether, your wife is working or not, you can claim as long as your child/children are eligible.
Good day! Ask lang po ako. Kasi I’m the eldest child at ako yung breadwinner. Pwede bang i-add sa dependents ang mga kapatid ko?
Hello, additional exemptions pertains to qualified dependent children, not siblings. “Dependent Child” means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.