BIR TRAIN Law Tax Table: How Much Tax Do You Pay?

Every payday, a chunk of your salary disappears into a line item labeled "withholding tax," and for most Filipino employees, that number is governed by a single piece of legislation: the TRAIN Law. Whether you're a fresh graduate opening your first payslip or a long-time employee trying to make sense of why your take-home pay changed after a raise, understanding the BIR TRAIN Law tax table is the key to knowing exactly how much of your income the government takes — and why. This guide walks through the 2026 tax brackets in full, shows you real peso computations for each one, and explains the difference between the tax rate printed on the table and the tax rate you actually pay.

What Is the TRAIN Law?

TRAIN stands for Tax Reform for Acceleration and Inclusion, and it's formally known as Republic Act No. 10963. Signed into law in December 2017 and taking effect on January 1, 2018, TRAIN was the first package of a broader tax reform program aimed at simplifying the Philippine tax system and easing the burden on lower and middle-income earners while raising revenue from other sources like fuel, sugar-sweetened beverages, and certain luxury goods.

Before TRAIN, the personal income tax schedule had not been meaningfully updated since 1997, despite decades of inflation and rising cost of living. Under the old system, someone earning just above the minimum wage could find themselves taxed at rates similar to someone earning several times more. TRAIN addressed this directly by restructuring the income tax brackets, exempting the first ₱250,000 of annual taxable income entirely, and adjusting the marginal rates applied at each subsequent bracket.

The law also introduced a further round of adjustments originally scheduled for 2023, which slightly lowered rates in the middle brackets compared to the initial 2018–2022 schedule. The figures used throughout this article reflect the tax table currently in effect for the 2026 tax year, and they are the same brackets your employer's payroll system should be using to compute your withholding tax today.

The 2026 BIR Income Tax Table (TRAIN Law)

The TRAIN Law tax table is applied to your annual taxable income — that is, your gross compensation income for the year, minus mandatory contributions (SSS, PhilHealth, Pag-IBIG) and any non-taxable benefits. The table is structured as six brackets, each with its own base tax amount and marginal rate applied to the excess over the bracket's floor.

This structure means that no one pays a single flat percentage on their entire income. Instead, each bracket only taxes the portion of income that falls within it — a system called progressive taxation. Let's walk through a worked example for each bracket so you can see exactly how the math plays out.

Bracket 1: ₱0 – ₱250,000 (0% — Tax Exempt)

Anyone with annual taxable income of ₱250,000 or below pays zero income tax. This is roughly equivalent to a monthly taxable income of about ₱20,833, which covers a large share of minimum-wage and entry-level earners once mandatory contributions are deducted. If your total taxable income for the year is exactly ₱250,000, your tax due is ₱0 — full stop.

Bracket 2: ₱250,001 – ₱400,000 (15% of excess over ₱250,000)

Suppose your annual taxable income is ₱350,000. The first ₱250,000 remains untaxed. Only the remaining ₱100,000 (₱350,000 − ₱250,000) is subject to tax, at a rate of 15%.

₱350,000 − ₱250,000 = ₱100,000 excess
₱100,000 × 15% = ₱15,000 tax due

So on a ₱350,000 annual taxable income, you owe ₱15,000 in income tax for the year — even though ₱250,000 of that ₱350,000 was never taxed at all.

Bracket 3: ₱400,001 – ₱800,000 (₱22,500 + 20% of excess over ₱400,000)

Let's say your annual taxable income is ₱600,000. This falls into the third bracket, which carries a fixed base tax of ₱22,500 (the tax already accumulated from the first two brackets) plus 20% of whatever income exceeds ₱400,000.

₱600,000 − ₱400,000 = ₱200,000 excess
₱200,000 × 20% = ₱40,000
₱40,000 + ₱22,500 base = ₱62,500 tax due

A ₱600,000 annual taxable income results in ₱62,500 in tax for the year, or roughly ₱5,208 per month if spread evenly.

Bracket 4: ₱800,001 – ₱2,000,000 (₱102,500 + 25% of excess over ₱800,000)

Consider someone with an annual taxable income of ₱1,200,000, common among senior managers or high-earning professionals. The base tax for reaching this bracket is ₱102,500, plus 25% of the amount above ₱800,000.

₱1,200,000 − ₱800,000 = ₱400,000 excess
₱400,000 × 25% = ₱100,000
₱100,000 + ₱102,500 base = ₱202,500 tax due

This individual owes ₱202,500 in annual income tax on ₱1,200,000 of taxable income.

Bracket 5: ₱2,000,001 – ₱8,000,000 (₱402,500 + 30% of excess over ₱2,000,000)

For a taxable income of ₱3,000,000 — typical of a top executive or a highly successful business owner — the base tax is ₱402,500, plus 30% of the excess over ₱2,000,000.

₱3,000,000 − ₱2,000,000 = ₱1,000,000 excess
₱1,000,000 × 30% = ₱300,000
₱300,000 + ₱402,500 base = ₱702,500 tax due

Bracket 6: Over ₱8,000,000 (₱2,202,500 + 35% of excess over ₱8,000,000)

This is the top bracket, reserved for the highest earners. If someone earns ₱10,000,000 in annual taxable income, the base tax is already ₱2,202,500, plus 35% of everything above ₱8,000,000.

₱10,000,000 − ₱8,000,000 = ₱2,000,000 excess
₱2,000,000 × 35% = ₱700,000
₱700,000 + ₱2,202,500 base = ₱2,902,500 tax due

Marginal Rate vs. Effective Rate: Why They're Not the Same Number

One of the most common points of confusion in Philippine payroll is the difference between your marginal tax rate and your effective tax rate. They sound similar, but they answer two very different questions.

Your marginal rate is the rate applied to your last peso of income — the rate tied to the bracket your total income falls into. Your effective rate is the rate you actually pay when your total tax due is divided by your total income. Because the TRAIN table is progressive, your effective rate is always lowerthan your marginal rate, often significantly so.

Go back to the ₱1,200,000 example above. That taxpayer falls into the bracket with a 25% marginal rate — but they don't pay 25% on all ₱1,200,000. They pay 0% on the first ₱250,000, 15% on the next ₱150,000, 20% on the next ₱400,000, and only the final ₱400,000 gets taxed at 25%. Their actual tax bill was ₱202,500, which works out to an effective rate of:

₱202,500 ÷ ₱1,200,000 = 16.875% effective tax rate

That's a full 8.1 percentage points lower than their 25% marginal rate. This gap matters because it's easy to panic when you see "I'm in the 25% bracket" and assume a quarter of your paycheck is gone — in reality, the blended, effective impact on your total income is almost always noticeably softer. It's also why earning a raise that pushes you into a higher bracket never means your entire income suddenly gets taxed at the new, higher rate — only the incremental amount above the new bracket's floor does.

How Withholding Tax Works on Your Payslip

Because the BIR tax table above is expressed in annual terms, employers can't simply wait until December to collect a year's worth of tax in one lump sum. Instead, the BIR requires employers to withhold tax from every payroll cycle using a method that projects or annualizes your income across the full year, applies the TRAIN brackets on a pro-rated basis for that pay period, and adjusts as your actual earnings (including overtime, bonuses, and other pay) come in.

This is why your withholding tax can shift slightly from one payroll to the next even if your basic salary hasn't changed — overtime pay, night differential, and other taxable add-ons all feed into the annualized computation. At year-end, employers perform a final "annualization" or true-up: if too much tax was withheld across the year, you may receive a refund (often folded into your December pay); if too little was withheld, the shortfall is typically collected in your final payslip of the year.

It's worth noting that mandatory contributions — SSS, PhilHealth, and Pag-IBIG — are deducted from your gross pay before the TRAIN table is applied, since these are non-taxable deductions. Only what remains after those deductions counts as your taxable compensation income for withholding tax purposes.

Compensation Earners vs. Mixed-Income and Self-Employed Individuals

The TRAIN Law's income tax table applies broadly to individual taxpayers, but how it's applied differs depending on the source of your income.

Pure Compensation Earners

If you are employed and receive a salary reported under an employer-employee relationship, you're a "pure compensation earner." Your employer withholds tax from every payslip automatically using the annualized method described above, and for most rank-and-file employees with a single employer, the year-end annualization from your employer serves as your final tax settlement — you often don't need to file your own annual income tax return, since your employer's BIR Form 2316 stands in for it (a "substituted filing" arrangement).

Self-Employed and Professionals

If you earn income from your own business or professional practice — freelancers, consultants, sole proprietors, professionals like doctors or lawyers in private practice — you're responsible for computing and remitting your own income tax. You have a choice between two systems: the graduated TRAIN tax table shown above (applied to your net taxable income after allowable business deductions), or, if your gross sales or receipts don't exceed the VAT threshold, an 8% flat tax on gross sales/receipts in excess of ₱250,000, in lieu of both the income tax table and percentage tax. Choosing between the two options depends heavily on how much in deductible expenses you actually have — the graduated table tends to favor those with substantial business costs to deduct, while the flat 8% option favors those with minimal expenses and a preference for simplicity.

Mixed-Income Earners

Many Filipinos today hold a regular job while also freelancing, running a side business, or renting out property. These "mixed-income earners" are taxed under both regimes simultaneously: their compensation income is taxed under the standard TRAIN table via employer withholding as described above, while their self-employment or business income is taxed separately, either under the same graduated table (net of deductions) or the 8% flat option on gross receipts — but notably, for mixed-income earners, the ₱250,000 exemption on the graduated table has effectively already been used up by their compensation income, so the 8% flat option (if elected) applies to the full gross receipts from their business or practice, without a separate ₱250,000 exemption carved out again.

Getting this distinction right matters: a mixed-income earner who assumes they get two separate ₱250,000 exemptions — one for their job and one for their side hustle — will under-remit tax and face penalties and interest during a BIR audit or annual filing reconciliation.

How Tax Interacts With 13th Month Pay and Other Payroll Items

Your 13th month pay, mandated under Presidential Decree 851 for all rank-and-file employees who have worked at least one month during the calendar year, is computed as your total basic salary earned for the year divided by 12. It must be paid on or before December 24. For tax purposes, 13th month pay and other bonuses are combined and the first ₱90,000 is tax-exempt; any amount above ₱90,000 gets added back into your taxable income and taxed according to the TRAIN table.

This is a common point of confusion during the December payroll crunch: an employee whose 13th month pay, combined with other bonuses, comes out to ₱110,000 will only have ₱20,000 of that amount added to their taxable income for the year — the rest remains exempt.

Overtime pay, holiday premium pay, and night shift differential are all fully taxable compensation and are folded into the annualized withholding computation just like your basic salary. Under the Labor Code, regular overtime is paid at 125% of your hourly rate, work on a rest day is paid at 130% of your daily rate (169% for rest-day overtime), a special (non-working) holiday is paid at 130% of your daily rate (150% if it also falls on your rest day), a regular holiday worked is paid at 200% of your daily rate (260% if combined with a rest day), and night shift differential adds 10% to your hourly rate for hours worked between 10:00 PM and 6:00 AM. All of these premiums increase your gross taxable compensation for the pay period in which they're earned.

Frequently Asked Questions

Do I need to pay income tax if I earn minimum wage?

Minimum wage earners are generally exempt from income tax under Philippine law, regardless of region. Since minimum wage rates (set per region by the Regional Tripartite Wages and Productivity Boards, ranging roughly from ₱436 to ₱755 per day depending on the region as of 2026) annualize to figures well within or near the ₱250,000 tax-exempt threshold for most regions, minimum wage earners typically fall entirely within the 0% bracket, and any statutory minimum wage, holiday pay, overtime, night differential, and hazard pay they receive is likewise exempt.

Why did my withholding tax change even though my basic salary stayed the same?

Withholding tax is computed on your total taxable compensation for the pay period, not just your basic salary. Overtime, holiday premiums, night differential, allowances, and other taxable add-ons all shift the amount withheld from one cutoff to the next, even without a change in your base pay.

Is the ₱250,000 exemption per year or per paycheck?

It's an annual figure. Employers pro-rate the exemption across your pay periods when computing withholding tax throughout the year, then true it up against your actual annual taxable income at year-end.

What's the difference between marginal and effective tax rate again?

Your marginal rate is the bracket rate applied only to your last peso of taxable income. Your effective rate is your total tax due divided by your total taxable income — a blended average across all the brackets your income passed through. Because of the progressive structure, your effective rate is always lower than your marginal rate.

Can I lower my taxable income legally?

Mandatory contributions to SSS, PhilHealth, and Pag-IBIG are deducted before the TRAIN table is applied, which already reduces your taxable base. Beyond that, most rank-and-file employees have limited additional levers available to them under current rules, since most allowances beyond statutory de minimis benefits are treated as taxable compensation.

Do self-employed individuals use the same tax table?

Self-employed individuals and professionals may opt to use the same graduated TRAIN table (applied to net income after deductions) or elect an 8% flat tax on gross sales or receipts in excess of ₱250,000, whichever is more advantageous given their deductible expenses.