How the Income Tax Philippines Calculator works
This calculator estimates annual Philippine personal income tax on compensation income using the graduated tax table introduced by the TRAIN Law (Republic Act 10963) and in effect since January 1, 2023. You enter annual gross compensation, 13th month pay and other benefits, mandatory government contributions, and any other non-taxable deductions; the calculator derives your taxable income and applies the official bracket schedule to it.
Step 1: work out taxable income
13th month pay and other benefits are exempt from tax up to ₱90,000 per year; only the amount above that threshold is added to taxable income. Mandatory SSS, PhilHealth, and Pag-IBIG contributions, along with any other non-taxable deductions you enter, are subtracted from gross compensation. In formula form:
Taxable income = Gross compensation − Mandatory contributions − Other deductions + max(0, 13th month pay − ₱90,000)
Step 2: apply the TRAIN Law brackets
The graduated table below applies to annual taxable income and has been in effect since January 1, 2023:
- ₱0 – ₱250,000: 0%
- ₱250,000 – ₱400,000: 15% of the excess over ₱250,000
- ₱400,000 – ₱800,000: ₱22,500 + 20% of the excess over ₱400,000
- ₱800,000 – ₱2,000,000: ₱102,500 + 25% of the excess over ₱800,000
- ₱2,000,000 – ₱8,000,000: ₱402,500 + 30% of the excess over ₱2,000,000
- Over ₱8,000,000: ₱2,202,500 + 35% of the excess over ₱8,000,000
Each bracket's base amount already accounts for the tax owed on every lower bracket, so you never re-apply a rate to income that was taxed at a lower rate — this is standard graduated (marginal) taxation, the same structure used for U.S. federal brackets and most other progressive income tax systems.
Worked example
Suppose annual gross compensation is ₱600,000, with ₱50,000 of 13th month pay and other benefits (fully within the ₱90,000 exemption, so none of it is taxable), ₱30,000 of mandatory contributions, and no other deductions. Taxable income is ₱600,000 − ₱30,000 = ₱570,000. That falls in the ₱400,000–₱800,000 bracket: tax due = ₱22,500 + 20% × (₱570,000 − ₱400,000) = ₱22,500 + ₱34,000 = ₱56,500. The effective rate on total gross income (₱650,000 including the 13th month pay) is about 8.7%, well below the 20% marginal rate on the last peso earned.
Marginal versus effective rate
The marginal rate is the rate applied to your next peso of taxable income — it jumps at each bracket boundary. The effective rate is total tax divided by total gross income, blending the 0% exempt portion with the higher rate above it. Effective rate is always lower than marginal rate once any tax is owed, which is why take-home pay drops more gradually than the bracket percentages suggest.
What this calculator does not cover
This tool computes annual income tax due on compensation income using the published TRAIN Law table. It does not replicate the BIR's per-payroll withholding tax tables (which employers use to withhold tax each pay period), does not handle mixed income (compensation plus business or professional income) or the 8% flat-tax option available to some self-employed and professional taxpayers, and does not account for additional exemptions specific to your employer's benefits program. Treat the result as a planning estimate and confirm exact withholding with your employer's payroll or a tax professional.