How to Compute Income Tax in the Philippines (2026, Step by Step)

Quick answer: To compute income tax, (1) annualize your salary, (2) subtract your SSS, PhilHealth and Pag-IBIG to get taxable income, then (3) apply the TRAIN brackets — the first ₱250,000 is exempt; above it you pay a fixed amount plus a percentage of the excess. Or just use the calculator →

Step 1 — Find your annual gross income

If you are paid monthly, multiply by 12:

₱30,000 × 12 = ₱360,000 per year

Your 13th month pay is not added here — it is tax-exempt up to ₱90,000.

Step 2 — Subtract your contributions

Your mandatory contributions are tax-exempt, so they reduce taxable income. For a ₱30,000 salary, the rough monthly figures are:

Contribution	Approx. monthly	Approx. yearly
SSS (employee share)	₱1,350	₱16,200
PhilHealth	₱750	₱9,000
Pag-IBIG	₱200	₱2,400
Total	~₱2,300	~₱27,600

Taxable income = ₱360,000 − ₱27,600 = ₱332,400

(Use the SSS, PhilHealth and Pag-IBIG calculators for exact figures.)

Step 3 — Apply the TRAIN brackets

Find the bracket your taxable income falls into and apply the formula:

Annual taxable income	Tax
₱0 – ₱250,000	0%
₱250,000 – ₱400,000	15% of excess over ₱250,000
₱400,000 – ₱800,000	₱22,500 + 20% of excess over ₱400,000
₱800,000 – ₱2,000,000	₱102,500 + 25% of excess over ₱800,000
₱2,000,000 – ₱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

For ₱332,400 (the 15% bracket):

Income tax = 15% × (₱332,400 − ₱250,000)
           = 15% × ₱82,400
           = ₱12,360 per year  (≈ ₱1,030/month)

How monthly withholding fits in

Your employer does not wait until year-end — they withhold tax every payday using the BIR withholding table, which is just the annual brackets divided by the number of pay periods. Over the year these should add up to your annual income tax. See how withholding tax works or use the Withholding Tax Calculator.

A faster way

The arithmetic is easy to get wrong, especially with the contribution figures. The Income Tax Calculator takes your salary and does every step above — including the 8% option if you are self-employed.

Source: Bureau of Internal Revenue (BIR), TRAIN Law (RA 10963). For estimation only — confirm with the BIR or your HR.

Frequently Asked Questions

How do you compute income tax on salary in the Philippines?

Take your annual gross salary, subtract your SSS, PhilHealth and Pag-IBIG contributions to get taxable income, then apply the TRAIN brackets: the first ₱250,000 is exempt, and above that you pay the fixed amount for your bracket plus a percentage of the excess.

How is monthly income tax computed?

Employers compute it per payday using the BIR withholding table: your taxable pay for the period is matched to the bracket and the tax is deducted. Over the year these withholdings should add up to your annual income tax.

What is taxable income?

Taxable income is your gross compensation minus tax-exempt items: your mandatory SSS, PhilHealth and Pag-IBIG contributions, plus 13th month pay and benefits up to ₱90,000. Tax is computed on what remains, not on your full salary.

How much tax is deducted from a ₱25,000 salary?

A ₱25,000 monthly salary is ₱300,000 a year. After about ₱15,000 in contributions, taxable income is roughly ₱285,000. Tax is 15% × (₱285,000 − ₱250,000) ≈ ₱5,250 a year, or about ₱440 a month.