Your income tax in 2026: the rates and what is tax-free

A plain guide to the income tax Filipinos pay in 2026: the first P250,000 that is tax-free, the graduated rates, and the P90,000 bonus exemption.

Open your payslip and look for the line that says withholding tax. That is your income tax, taken out in advance every payday. Most people never check how it is computed. Here is how the numbers actually work in 2026, and which parts of your pay the law leaves alone.

The first P250,000 is tax-free

Under Republic Act No. 10963 (the TRAIN Law), which amended Section 24 of the National Internal Revenue Code, the first P250,000 of your annual taxable income is taxed at zero. Earn P250,000 or less in a year after the mandatory deductions, and you owe no income tax at all.

Above that, the rates climb in steps. Only the amount that falls inside each step is taxed at that step's rate, never your whole income. The schedule in force since 1 January 2023 is:

- Not over P250,000: 0 percent
- Over P250,000 to P400,000: 15 percent of the excess over P250,000
- Over P400,000 to P800,000: P22,500 plus 20 percent of the excess over P400,000
- Over P800,000 to P2,000,000: P102,500 plus 25 percent of the excess over P800,000
- Over P2,000,000 to P8,000,000: P402,500 plus 30 percent of the excess over P2,000,000
- Over P8,000,000: P2,202,500 plus 35 percent of the excess over P8,000,000

These are the second set of TRAIN rates, lower than the 2018 to 2022 version. They took effect in 2023, and no later law has changed them, so they are still the rates for 2026.

What taxable income means

The rate applies to taxable income, not gross pay. Your mandatory shares to SSS, PhilHealth, and Pag-IBIG come off first and are not taxed. So do your 13th month pay and bonuses, up to a limit (below). Someone earning P30,000 a month is not simply taxed on P360,000; the contributions and exempt benefits come out before the rate touches anything.

Your 13th month pay, up to P90,000

Section 32(B)(7)(e) of the Tax Code, as amended by the TRAIN Law, keeps your 13th month pay and other benefits tax-free up to a combined P90,000 a year. That ceiling covers the 13th month, the Christmas bonus, productivity incentives, and similar extras added together. Go past P90,000 and only the excess is added to your taxable income. That figure has held since 2018 and is still the cap in 2026.

Minimum wage earners pay nothing

If you earn the statutory minimum wage, Section 24 of the Tax Code exempts you from income tax on that wage, and on your holiday pay, overtime, night shift differential, and hazard pay too. Picking up a little sideline income does not undo the exemption on the minimum wage itself; only the extra income is taxable.

If you are self-employed or freelancing

Running a sari-sari store, taking online gigs, or practicing a profession? If your gross sales or receipts stay within the P3 million VAT threshold, you may choose a flat 8 percent tax on your gross over P250,000, in place of the graduated rates and the percentage tax. You signify the choice on your first quarterly return each year, and it is locked in for that year. The table above is the default if you do not elect the 8 percent.

Your income tax in 2026: the rates and what is tax-free

More in Tax

The Donor's Tax On Your Gifts, and the BIR's New Cash Rules

How to Transfer Land Title After a Parent Dies in the Philippines

You received a BIR Letter of Authority. What should you do?

RG Briefs