Tax Deductions and Exemptions in the Philippines 2025
Learn about various tax deductions and exemptions available to Filipino taxpayers and how to claim them.
Pro Tip: Maximizing your tax deductions can significantly reduce your taxable income and increase your take-home pay. Every peso deducted is a peso you don't pay tax on.
What Are Tax Deductions?
Tax deductions are expenses or contributions that you can subtract from your gross income to arrive at your taxable income. In the Philippines, there are two main types of deductions: mandatory contributions and optional deductions. The more deductions you can claim, the lower your taxable income becomes, which means less tax to pay.
Understanding and maximizing your tax deductions is one of the most effective ways to reduce your tax burden legally. This guide will walk you through all the available deductions and exemptions for Filipino taxpayers.
Mandatory Contributions (Automatic Deductions)
These are contributions that are automatically deducted from your salary and are mandatory for all employees. They are deducted before calculating your income tax.
1. SSS (Social Security System) Contributions
SSS contributions provide social security benefits including retirement, disability, death, and maternity benefits.
Contribution Rates (2025)
- • Employee: 4.5% of salary credit
- • Employer: 8.5% of salary credit
- • Minimum: ₱180 (₱4,250 salary)
- • Maximum: ₱4,500 (₱100,000+ salary)
Benefits
- • Retirement pension
- • Disability benefits
- • Death benefits
- • Maternity benefits
- • Sickness benefits
2. PhilHealth (Philippine Health Insurance Corporation) Contributions
PhilHealth provides health insurance coverage for medical expenses, hospitalization, and other healthcare services.
Contribution Rates (2025)
- • Employee: 2.5% of monthly salary
- • Employer: 2.5% of monthly salary
- • Minimum: ₱400 (₱10,000 salary)
- • Maximum: ₱3,200 (₱80,000+ salary)
Coverage
- • Hospitalization
- • Outpatient services
- • Maternity care
- • Emergency services
- • Preventive care
3. Pag-IBIG (Home Development Mutual Fund) Contributions
Pag-IBIG provides housing loans, short-term loans, and savings programs for members.
Contribution Rates (2025)
- • ₱1,500 and below: 1%
- • Above ₱1,500: 2%
- • Maximum base: ₱10,000
- • Maximum contribution: ₱200
Benefits
- • Housing loans
- • Multi-purpose loans
- • Calamity loans
- • Savings program
- • Retirement benefits
Optional Deductions and Exemptions
These are deductions you can claim to further reduce your taxable income. They require proper documentation and filing.
1. Personal Exemptions
Personal exemptions are fixed amounts that can be deducted from your gross income.
| Type of Exemption | Amount (Annual) | Requirements |
|---|---|---|
| Basic Personal Exemption | ₱250,000 | All individual taxpayers |
| Additional Exemption per Dependent | ₱25,000 | Up to 4 dependents (children under 21, elderly parents) |
2. 13th Month Pay and Other Benefits
Certain benefits are exempt from income tax up to certain limits.
- 13th Month Pay: Exempt up to ₱90,000 annually
- De Minimis Benefits: Various small benefits exempt from tax
- Rice Subsidy: Up to ₱2,000 per month
- Uniform/Clothing Allowance: Up to ₱6,000 per year
- Medical Cash Allowance: Up to ₱10,000 per year
3. Business and Professional Expenses
For self-employed individuals and professionals, various business expenses can be deducted.
- Office Rent: Actual rent paid for business premises
- Utilities: Electricity, water, internet for business use
- Supplies: Office supplies and materials
- Professional Fees: Legal, accounting, and consulting fees
- Transportation: Business-related travel expenses
- Depreciation: Equipment and furniture depreciation
How to Maximize Your Deductions
Strategic Tax Planning Tips
For Employees
- • Ensure all mandatory contributions are properly deducted
- • Claim all available de minimis benefits
- • Keep records of all work-related expenses
- • Maximize 13th month pay exemption
- • Consider voluntary SSS contributions
For Self-Employed
- • Keep detailed records of all business expenses
- • Separate personal and business expenses
- • Claim home office expenses if applicable
- • Maximize professional development expenses
- • Consider incorporating for better tax treatment
Common Deduction Mistakes to Avoid
❌ Not Keeping Proper Records
Always maintain receipts, invoices, and other supporting documents for all deductions you claim. The BIR may require these during audits.
❌ Claiming Personal Expenses as Business Expenses
Only expenses that are directly related to your business or profession can be deducted. Personal expenses are not deductible.
❌ Not Understanding De Minimis Benefits
De minimis benefits have specific limits. Exceeding these limits makes the excess amount taxable.
Documentation Requirements
Essential Documents to Keep
For All Taxpayers
- • BIR Form 2316 (Certificate of Compensation Payment)
- • SSS, PhilHealth, Pag-IBIG contribution receipts
- • Bank statements and passbooks
- • Property tax receipts
- • Medical and hospital receipts
For Self-Employed
- • Official receipts and invoices
- • Business registration documents
- • Books of accounts
- • Bank statements for business accounts
- • Contracts and agreements
Calculate Your Tax Savings
Use our free Philippine tax calculator to see how deductions affect your take-home pay and tax liability.
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