TRAIN Law Explained: What Actually Changed in Philippine Income Tax

What is the TRAIN law?

TRAIN — the Tax Reform for Acceleration and Inclusion Act, Republic Act No. 10963 — was signed into law in December 2017 and took effect January 1, 2018. It restructured personal income tax and, in exchange for lower income tax collections, broadened VAT coverage and added or raised excise taxes on fuel, sugar-sweetened beverages, automobiles, and a handful of other goods. This guide only covers the income tax side, since that's what our calculators compute.

TRAIN set two income tax schedules: a transitional one for 2018 through 2022, and a further-reduced schedule for 2023 onward. The 2023 schedule is the current one, and it's what every tax calculator on this site uses.

The current brackets, in brief

Annual taxable income up to ₱250,000 is tax-free. Above that, tax is graduated — 15% on the next bracket up to ₱400,000, 20% up to ₱800,000, 25% up to ₱2,000,000, 30% up to ₱8,000,000, and 35% beyond that. Each rate only applies to the income inside that bracket, not your whole income — earning ₱410,000 doesn't push all of it into the 20% bracket, only the ₱10,000 above ₱400,000.

For the full bracket table with the exact base-tax figures and a calculator that highlights which row applies to you, see the BIR Tax Calculator.

What changed from the pre-TRAIN system

Before 2018, individual taxpayers reduced their taxable income with a ₱50,000 personal exemption plus ₱25,000 per qualified dependent (up to four), on top of a lower zero-tax floor and a top marginal rate of 32%. TRAIN removed the exemption system entirely and replaced it with a single, much higher ₱250,000 tax-free floor that applies to everyone regardless of dependents — simpler to compute, and a net tax cut for most minimum- and middle-income earners. Whether it's a net win for a specific high earner with several dependents depends on exactly how their old exemptions compared to the new floor.

What's tax-exempt regardless of bracket

• 13th month pay and other benefits are exempt up to ₱90,000 combined per year (raised from ₱82,000 under the pre-TRAIN rules) — only the excess above that is added to taxable income. See the 13th Month Pay Calculator for the exact split.
• De minimis benefits — small, specific non-cash perks like a meal allowance, rice subsidy, or uniform allowance — are exempt up to their own separate, much smaller caps set by BIR regulations, on top of the ₱90,000 above.
• Mandatory contributions — your SSS, PhilHealth, and Pag-IBIG employee shares — are deducted before your taxable income is computed at all, so they never enter the bracket calculation in the first place.

Self-employed and mixed-income earners: the 8% option

TRAIN gave self-employed individuals and professionals with gross sales or receipts of ₱3,000,000 or less per year a choice: pay the same graduated rates as employees (plus the percentage tax that applies to most small businesses), or elect a flat 8% tax on gross sales or receipts in excess of ₱250,000, in lieu of both. The 8% option trades potential deductions for simplicity — no need to track and substantiate business expenses — and once elected for a taxable year, it's generally irrevocable until the next one.

Mixed-income earners — someone with both a salaried job and a side business, for example — pay graduated rates on the compensation portion no matter what, and can only apply the 8% option to the business or professional income portion if they qualify.

Why your payslip withholding doesn't always match your annual tax due

Your employer withholds tax from every payslip using an annualized approximation of your pay for that period, then reconciles the full year at your last payslip (or via BIR Form 2316). A mid-year raise, a one-off bonus, or a job change partway through the year can all throw off that approximation, so the sum of what got withheld sometimes differs slightly from your actual computed annual tax due. See the Withholding Tax Calculator to estimate a specific payslip, or the Salary Tax Calculator to see your full-year picture.