Graduated income tax table 2026
These are the graduated rates for individuals for taxable year 2026. The schedule took effect on January 1, 2023 and applies "onwards" under NIRC Sec. 24(A)(2)(a), as amended by RA 10963 (TRAIN). No later law has changed it. Graduated rates apply to your net taxable income for the year.
| Annual taxable income | Income tax |
|---|---|
| ₱250,000 and below | 0% |
| Over ₱250,000 to ₱400,000 | 15% of the excess over ₱250,000 |
| Over ₱400,000 to ₱800,000 | ₱22,500 + 20% of the excess over ₱400,000 |
| Over ₱800,000 to ₱2,000,000 | ₱102,500 + 25% of the excess over ₱800,000 |
| Over ₱2,000,000 to ₱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 |
Employees are always on this table for their salary. If you earn from a business or profession, you can instead elect the 8% income tax option: 8% of gross sales or receipts and other non-operating income above ₱250,000, in lieu of both the graduated rates and the 3% percentage tax (NIRC Sec. 24(A)(2)(b)). The rest of this page shows which one costs less.
8% vs graduated: the answer at four income levels
Every figure below comes from this site's income tax calculator engine, for a purely self-employed filer with no other income. The graduated route adds the 3% percentage tax on gross sales (NIRC Sec. 116), because the 8% option replaces it.
| Gross sales a year | 8% option | Graduated with 40% OSD + 3% percentage tax | Cheaper | Graduated wins only if real expenses exceed |
|---|---|---|---|---|
| ₱500,000 | ₱20,000 | ₱7,500 + ₱15,000 = ₱22,500 | 8% by ₱2,500 | ₱216,667 (43%) |
| ₱1,000,000 | ₱60,000 | ₱62,500 + ₱30,000 = ₱92,500 | 8% by ₱32,500 | ₱562,500 (56%) |
| ₱2,000,000 | ₱140,000 | ₱202,500 + ₱60,000 = ₱262,500 | 8% by ₱122,500 | ₱1,312,500 (66%) |
| ₱3,000,000 | ₱220,000 | ₱352,500 + ₱90,000 = ₱442,500 | 8% by ₱222,500 | ₱2,090,000 (70%) |
How the ₱1,000,000 row works. 8% option: (₱1,000,000 − ₱250,000) × 8% = ₱60,000. Graduated with OSD: taxable income is 60% of gross, or ₱600,000, so tax is ₱22,500 + 20% × ₱200,000 = ₱62,500, plus ₱30,000 percentage tax. Break-even: graduated tax plus ₱30,000 equals ₱60,000 when net income is ₱437,500, which means ₱562,500 of deductible expenses.
Choose 8% if your gross sales stay at or below ₱3,000,000, you are not VAT-registered, and your documented business expenses are below the break-even share in the last column. That share rises with income, from about 43% at ₱500,000 to 70% at ₱3,000,000. Choose graduated rates if your expenses are above that share and you can prove them with receipts. If you would claim the 40% OSD instead of itemizing, 8% is cheaper at every gross above ₱437,000; between about ₱401,000 and ₱437,000, OSD wins by at most about ₱833.
Below ₱250,000 of gross sales the 8% tax is zero, while the graduated route still owes the 3% percentage tax. Above ₱3,000,000 there is no choice: the 8% option ends and graduated rates apply.
Who qualifies for the 8% rate?
You can elect 8% only if all of these are true (RR 8-2018):
- You earn from self-employment or a profession, alone or together with a salary (see the self-employed taxpayer guide).
- Your gross sales or receipts and other non-operating income do not exceed the ₱3,000,000 VAT threshold.
- You are not VAT-registered and not subject to any percentage tax other than Sec. 116.
- You are not using it on a distributive share from a general professional partnership.
Purely salaried employees cannot elect 8%. Online sellers, ride-hailing drivers and content creators usually can; see our guides for freelancers, online sellers and ride-hailing drivers.
The ₱250,000 deduction and the mixed-income catch
A purely self-employed filer subtracts ₱250,000 from gross before applying 8%, so the formula is 8% tax = (gross sales + other non-operating income − ₱250,000) × 8%. This mirrors the 0% first bracket of the graduated table.
If you also have a salary, you do not get the ₱250,000 on your business income. RR 8-2018 says that amount is already built into the first bracket of the graduated rates on your compensation. Your salary stays on the graduated table, your business income is taxed at 8% of gross, and you file BIR Form 1701.
Crossing the ₱3,000,000 VAT threshold
If your gross sales pass ₱3,000,000 during the year, you are automatically taxed at graduated rates for that year (RR 8-2018), and you must register for VAT (NIRC Sec. 109(CC), as amended by RA 11976). You then pay 12% VAT instead of the 3% percentage tax. See the VAT guide and percentage tax guide, or estimate amounts with the VAT calculator.
What the 8% option replaces
| Feature | 8% option | Graduated + 3% percentage tax |
|---|---|---|
| Tax base | Gross sales minus ₱250,000 | Net income (after OSD or itemized expenses) |
| Rate | 8% flat | 0% to 35% income tax + 3% of gross sales |
| Quarterly percentage tax (Form 2551Q) | Not filed | Filed every quarter |
| Annual return (purely self-employed) | 1701A | 1701A with OSD; 1701 with itemized deductions |
| Quarterly income tax return | 1701Q | 1701Q |
Worked break-even example with peso amounts
A freelance designer billing ₱1,200,000 a year, with ₱200,000 of real expenses:
- 8% option: (₱1,200,000 − ₱250,000) × 8% = ₱76,000.
- Graduated with itemized expenses: net income ₱1,000,000, tax ₱102,500 + 25% × ₱200,000 = ₱152,500, plus ₱36,000 percentage tax = ₱188,500.
- Graduated with 40% OSD: taxable ₱720,000, tax ₱86,500, plus ₱36,000 = ₱122,500.
The 8% option saves ₱46,500 against the best graduated route. A small printing shop with the same ₱1,200,000 but ₱900,000 of documented costs has net income of ₱300,000. Graduated tax is 15% × ₱50,000 = ₱7,500, plus ₱36,000 percentage tax, for ₱43,500. Its 8% tax would still be ₱76,000, so graduated wins by ₱32,500. Run your own figures in the income tax calculator and the percentage tax calculator.
Common mistakes to avoid
- Missing the election. You elect 8% on your first-quarter return, or on the first quarterly return of a new business. If you do not, you are on graduated rates for the whole year, and the choice is irrevocable for that year (RR 8-2018).
- Taking the ₱250,000 as a mixed-income earner. It does not apply to the business part of a mixed-income return.
- Using a flat "40% expenses" rule of thumb. The break-even share depends on your income: 43% at ₱500,000, 70% at ₱3,000,000. Check the table above.
- Itemizing expenses you cannot prove. Graduated rates only win on expenses backed by official receipts and invoices.
- Staying on 8% after passing ₱3,000,000. The year switches to graduated rates and VAT registration is required.
- Assuming 8% means no filing. You still file 1701Q each quarter and an annual return, and you need a TIN and BIR registration; see how to get a TIN and BIR registration.
How to elect the 8% rate
Before you file, have these ready: your TIN and Certificate of Registration (BIR Form 2303), your gross sales for the quarter, and an estimate of your full-year gross to confirm you stay at or below ₱3,000,000.
Mark the 8% option on your first-quarter income tax return (BIR Form 1701Q) or first-quarter percentage tax return. A new business elects on its first quarterly return after starting. Then keep filing 1701Q for the first three quarters and your annual return; see the quarterly deadlines guide and how to file your ITR. New freelancers can start with registering as a freelancer with the BIR, and the income tax guide covers the rest of the rules.
This page compares the two options for individuals with business or professional income. It does not cover corporations, VAT-registered sellers or partners in a general professional partnership, who cannot use 8%.
Sources and References
- Republic Act No. 10963 (TRAIN), Sec. 5 amending NIRC Sec. 24(A)(2), Lawphil
- Revenue Regulations No. 8-2018 (Digest), Bureau of Internal Revenue (BIR)
- Republic Act No. 11976 (Ease of Paying Taxes Act), amending NIRC Secs. 109 and 116, Lawphil
- Revenue Memorandum Order No. 23-2018 (Digest) - 8% Income Tax Rate Option, Bureau of Internal Revenue (BIR)
- TRAIN law to further reduce personal income taxes in 2023 onwards, Department of Finance (DOF)
- BIR reverts Percentage Tax to 3% effective July 1, 2023 (RMC No. 69-2023), Forvis Mazars Philippines
- Philippines - Individual - Taxes on personal income, PwC Worldwide Tax Summaries
- Income Tax Table & Tax Brackets (2023-onwards graduated rates), QuickBooks Philippines (Intuit)