If you are an employee in the Philippines and need to file your income tax return (ITR), you must ensure you’re doing it right. Tax filing can seem overwhelming, but with the correct steps, it doesn’t have to be. Let’s break down the income tax computation process so you can file correctly in 2026.
Key Takeaways
- “Substituted Filing” is an Option for Many Employees: Employees who have had only one employer for the entire 2025 year and no other sources of taxable income are generally eligible for “substituted filing.” This means they do not need to file their own Income Tax Return (ITR), as their employer’s filed BIR Form 2316 serves as their ITR.
- The Correct Employee Tax Formula Accounts for 2025 Hikes: The old ₱50,000 personal exemption and 40% Optional Standard Deduction (OSD) no longer apply. For the 2026 filing season, the formula is Gross Annual Income minus mandatory contributions (SSS share is now 5%, Pag-IBIG cap is ₱200) and the non-taxable 13th-month pay and bonuses (up to ₱90,000).
- The 15% Tax Bracket is in Effect: The income tax table effective for the 2026 filing (which reports 2025 income) applies a 15% tax rate to net taxable income in the bracket just above the tax-free threshold (₱250,001 to ₱400,000).
- The “Ease of Paying Taxes” (EOPT) Act Simplifies the Process: RA 11976 is in full effect for 2026. For employees, its main impact is the “File and Pay Anywhere” policy, allowing you to pay at any authorized bank or BIR office nationwide without incurring “wrong venue” penalties.
Understanding the Income Tax Filing Process
As an employee, you are required to file your personal income tax return (ITR) with the Bureau of Internal Revenue (BIR) if you are not qualified for substituted filing. The deadline for filing is April 15, following the close of the calendar year. For those who are not familiar with it, substituted filing means you don’t need to file a separate ITR because your employer’s BIR Form No. 2316 serves as your tax return.
Who Qualifies for Substituted Filing?
You are eligible for substituted filing if you meet all the following conditions:
- You had only one employer during the year.
- You have no other sources of taxable income except for your employment.
- Your tax was correctly withheld by your employer.
If you don’t meet these criteria, you must file your own income tax return.
Note: Under the EOPT Act, your eligibility is now based solely on your own income status, regardless of your spouse’s tax filing method.
What’s the Formula for Calculating Taxable Income?
The formula and tax rates for employees were fundamentally changed by the TRAIN Law. Personal exemptions have been replaced by a permanent tax-free threshold for the first ₱250,000 of annual income.
Since the 40% Optional Standard Deduction (OSD) is not available to salaried employees, the formula for computing your taxable base is straightforward:
Gross Annual Income
Less: Mandatory Contributions (SSS, PhilHealth, Pag-IBIG)
Less: Non-Taxable 13th Month Pay and Bonuses (up to ₱90,000)
Less: Non-Taxable “De Minimis” Benefits (Up to 2025 limits)
= Net Taxable Income
IMPORTANT: For your current filing, you must use the 2025 de minimis limits (e.g., ₱2,000/mo rice subsidy). However, be aware that starting January 6, 2026, these limits have increased (e.g., ₱2,500/mo rice subsidy). While these new rates don’t apply to your 2025 taxes, they are a vital tool for maximizing your take-home pay starting this year.
2026 Strategic Update: Maximizing Take-Home Pay
For the 2026 filing season, the BIR has provided a significant way to legally lower your taxes. Under Revenue Regulations (RR) No. 29-2025 (effective Jan 6, 2026), the tax-exempt ceilings for “De Minimis” benefits have increased.
These are small perks that do not count toward your ₱90,000 bonus cap and are 100% tax-free. Because these limits just increased, now is the best time to ensure your 2026 compensation structure maximizes these new ceilings:
- Rice Subsidy: Up to ₱2,500 per month (previously ₱2,000).
- Uniform/Clothing Allowance: Up to ₱8,000 per year (previously ₱7,000).
- Medical Cash Allowance (Dependents): Up to ₱2,000 per semester.
- Laundry Allowance: Up to ₱400 per month.
- Employee Achievement Awards: Up to ₱12,000 per year.
PRO-TIP: If your employer provides these benefits, using the updated 2026 ceilings effectively “shields” more of your salary from the BIR, resulting in higher take-home pay.
How much is a 25k salary after tax in the Philippines?
A ₱25,000 monthly salary is above the ₱250,000 annual tax-free threshold, but the final tax is determined by mandatory employee contributions, not personal exemptions or the 40% standard deduction (which does not apply to employees).
Let’s compute this correctly for the 2025 income year.
Step 1: Compute Gross Annual Income
₱25,000 / month × 12 months = ₱300,000
Step 2: Compute Annual Mandatory Contributions
These deductions are based on the latest 2025 contribution tables:
- SSS (5.0%): Based on a ₱25,000 salary, the employee share is ₱1,250/month.
- Annual SSS: ₱1,250 × 12 = ₱15,000
- PhilHealth (5.0%): The employee share is 2.5% of ₱25,000, or ₱625/month.
- Annual PhilHealth: ₱625 × 12 = ₱7,500
- Pag-IBIG (2%): The employee share is capped at ₱200/month.
- Annual Pag-IBIG: ₱200 × 12 = ₱2,400
- Total Annual Deductions: ₱15,000 + ₱7,500 + ₱2,400 = ₱24,900
Step 3: Calculate Net Taxable Income
Gross Income – Total Deductions = Taxable Income
₱300,000 – ₱24,900 = ₱275,100
Step 4: Compute Annual Tax Due
Using the official BIR tax table (effective 2023-2026):
- The first ₱250,000 is taxed at 0%.
- The remaining amount (₱275,100 – ₱250,000 = ₱25,100) is taxed at the 15% rate.
- Annual Tax: ₱25,100 × 0.15 = ₱3,765
An employee earning ₱25,000 monthly will have an annual income tax liability of approximately ₱3,765. This is typically collected by the employer as a monthly withholding tax of around ₱313.75.
How much is a 70k salary after tax in the Philippines?
Let’s use the correct tax formula, assuming a ₱70,000 monthly salary and a standard 13th-month pay.
Step 1: Compute Gross Compensation
- Annual Salary: ₱70,000 × 12 = ₱840,000
- 13th Month Pay: ₱70,000
- Total Annual Gross Compensation: ₱840,000 + ₱70,000 = ₱910,000
Step 2: Compute Non-Taxable Income
- Mandatory Contributions (Annual):
- SSS: Capped at ₱1,750/month (based on ₱35,000 MSC) = ₱21,000
- PhilHealth: 2.5% of ₱70,000 = ₱1,750/month = ₱21,000 (Note: The PhilHealth salary ceiling for 2025 is ₱100,000; since ₱70k is below this, the full 2.5% applies)
- Pag-IBIG: Capped at ₱200/month = ₱2,400
- Non-Taxable Bonus: The 13th-month pay of ₱70,000 is fully exempt, as it is below the ₱90,000 tax-free limit.
- Total Non-Taxable Income: ₱21,000 + ₱21,000 + ₱2,400 + ₱70,000 = ₱114,400
Step 3: Calculate Net Taxable Income
Gross Compensation – Total Non-Taxable Income = Taxable Income
₱910,000 – ₱114,400 = ₱795,600
Step 4: Compute Annual Tax Due
Using the tax table below, ₱795,600 falls into the ₱400,000 to ₱800,000 bracket.
- Base Tax: ₱22,500
- Excess: ₱795,600 – ₱400,000 = ₱395,600
- Tax on Excess: ₱395,600 × 0.20 (20% rate) = ₱79,120
- Annual Tax: ₱22,500 + ₱79,120 = ₱101,620
Philippine Income Tax Table (Effective 2023-2026)
| Net Taxable Income | Tax Rate |
| ₱250,000 and below | 0% |
| Over ₱250,000 to ₱400,000 | 15% of excess over ₱250,000 |
| Over ₱400,000 to ₱800,000 | ₱22,500 + 20% of excess over ₱400,000 |
| Over ₱800,000 to ₱2,000,000 | ₱102,500 + 25% of excess over ₱800,000 |
| Over ₱2,000,000 to ₱8,000,000 | ₱402,500 + 30% of excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,202,500 + 35% of excess over ₱8,000,000 |
How to Compute Your Income Tax
To compute your income tax, follow these straightforward steps:
Step 1: Gather Required Forms and Information
First, download the latest version of the eBIRForms from the BIR website. You will use this for your 2026 ITR filing.
BIR Form No. 1700: This form is for individuals earning purely compensation income, and it will help you compute your tax due based on your salary.
Step 2: Complete Your Personal Information
When filling out the form, make sure to include your personal details, such as your name, address, and Taxpayer Identification Number (TIN). Additionally, ensure you use a valid email address because the BIR will send your Tax Return Receipt Confirmation (TRRC) email to this address as proof of filing.
Step 3: Report Your Income
Next, consolidate your income from your employers, including taxable and non-taxable items. Don’t forget to input the taxes withheld from your BIR Form No. 2316 from your previous and current employers. You can also combine both your and your spouse’s income on one return if applicable.
Related: Know if you’re getting fair compensation in the Penbrothers Salary Guide 2025.
Step 4: Claim Exemptions
Employees are eligible for a non-taxable 13th-month pay and bonus exemption of up to ₱90,000. Additionally, ensure your employer has applied the newly increased 2026 De Minimis thresholds (such as the ₱2,500/mo rice subsidy and ₱8,000/yr clothing allowance) to maximize your deductions.
Step 5: Calculate Your Tax Due
The eBIRForms software will automatically compute your tax based on the graduated 2026 table. If your total tax due exceeds the taxes withheld by your employer(s) in 2025, you will need to pay the difference.
Step 6: Validate and Submit Your Tax Return
Once you’ve filled out the form, click “Validate” to check for any missing information. After validating, click “Submit/Final Copy.” A successful submission notice will appear, and you should also receive the TRRC email from the BIR as proof.
Step 7: Pay Your Taxes
If you have a tax balance, the deadline to pay for the 2025 income year is April 15, 2026.
- Online Payment: Use the ePayment channels available on the BIR website for a quicker and more convenient payment process.
Manual Payment: Under the Ease of Paying Taxes Act, you can now pay manually at any Authorized Agent Bank (AAB) or Revenue Collection Officer (RCO) nationwide, regardless of where your RDO is located. This “File and Pay Anywhere” policy eliminates penalties for wrong-venue filing.
Step 8: Submit Your Documents
If paying manually, print at least three copies of your BIR Forms and the TRRC email (or screenshot of the successful submission notice). Sign the forms, then submit them along with your payment. If you filed electronically with no tax due, you may still need to submit your BIR Form 2316 via the eAFS (Electronic Audited Financial Statements) system within 15 days of the April 15 deadline.
Is withholding tax 15%?
Yes, for a specific income bracket. For this year’s filing, the 15% income tax rate applies to individuals with a net taxable income over ₱250,000 but not exceeding ₱400,000.
This reduction is part of the TRAIN Law adjustments that took full effect in 2023 and remain the standard for both the 2025 and 2026 tax cycles.
How the ‘Ease of Paying Taxes’ (EOPT) Act Affects Filers
While the tax rates are set by the TRAIN Law, the process of filing in 2026 is governed by the Ease of Paying Taxes (EOPT) Act (RA 11976), which was enacted in 2024.
For employees, the primary impact is administrative simplification. The law emphasizes electronic filing and removes the previous distinction between “filing” and “payment” deadlines, unifying them to a single due date. For employees filing Form 1700, this deadline remains April 15.
Simplify Your Tax Filing: Ensure Accuracy and Compliance Today
Filing your income tax return (ITR) in the Philippines can be simple once you understand the process. Employers help by withholding taxes, but it’s your responsibility to ensure the correct filing and payment of any additional tax due. Remember to verify your RDO, use the eBIRForms, and ensure you claim the appropriate exemptions. By following these steps, you’ll be well on your way to filing your tax return correctly this year.
For further details, always check the BIR guidelines or consult with a tax professional if needed. Happy filing!
Frequently Asked Questions
You are eligible for substituted filing if you meet all of these conditions: you had only one employer during the year, and you have no other sources of taxable income.
For a ₱25,000 monthly salary, your annual tax is approximately ₱3,765. While the tax rate hasn’t changed, the mandatory contributions for SSS and Pag-IBIG have increased in 2025. This higher deduction actually lowers your taxable income compared to 2024, resulting in a slightly lower income tax bill but a different total take-home pay.
The correct formula is: your Gross Annual Income minus your Mandatory Contributions (SSS, PhilHealth, Pag-IBIG) minus your Non-Taxable 13th Month Pay and Bonuses (up to a maximum of ₱90,000).
No. Personal and additional exemptions were repealed by the TRAIN Law. They were replaced by the higher ₱250,000 annual tax-exempt threshold. Similarly, the 40% Optional Standard Deduction (OSD) is not available to employees; it is a benefit reserved strictly for self-employed individuals and professionals.
The 2026 filing continues to use the graduated tax table established by the TRAIN Law. Income up to ₱250,000 remains tax-exempt (0%). For income between ₱250,001 and ₱400,000, the rate is 15% of the amount exceeding ₱250,000. For complete accuracy, ensure you use the updated Offline eBIRForms Package v7.9.5 (or higher) for your electronic filing.
