The 2026 graduated income tax table
Graduated rates tax your net taxable income — your profit after deductions — in rising bands. The first ₱250,000 every year is tax-free:
| Annual taxable income | Income tax |
|---|---|
| ₱0 – 250,000 | 0% |
| Over 250,000 – 400,000 | 15% of excess over 250,000 |
| Over 400,000 – 800,000 | ₱22,500 + 20% of excess over 400,000 |
| Over 800,000 – 2,000,000 | ₱102,500 + 25% of excess over 800,000 |
| Over 2,000,000 – 8,000,000 | ₱402,500 + 30% of excess over 2,000,000 |
| Over 8,000,000 | ₱2,202,500 + 35% of excess over 8,000,000 |
Worked example
Say you're an online seller with ₱900,000 in gross sales and ₱500,000 of documented business expenses (goods, shipping, ads):
| ₱900,000 gross · graduated (itemized) | Amount |
|---|---|
| Gross sales | ₱900,000 |
| Less: business expenses | −₱500,000 |
| Net taxable income | ₱400,000 |
| Income tax: 15% × (400,000 − 250,000) | ₱22,500 |
| Plus: 3% percentage tax × 900,000 | ₱27,000 |
| Total tax for the year | ₱49,500 |
For comparison, the 8% option on the same gross would be (900,000 − 250,000) × 8% = ₱52,000. Here graduated is slightly cheaper because expenses are high. Flip the numbers — low expenses — and 8% usually wins.
Run your own numbers
Free, no sign-up. See graduated vs 8% and your filing deadlines.
Compute my tax →Itemized expenses vs the 40% OSD
Under graduated rates you choose how to deduct:
- Itemized: deduct your actual, receipted business expenses. Best when real expenses are high and well-documented.
- 40% Optional Standard Deduction (OSD): deduct a flat 40% of gross — no receipts needed — and pay tax on the remaining 60%. Best when your real expenses are below 40% of sales, or your records are thin.
Frequently asked questions
＋ How is graduated income tax computed in the Philippines?
Graduated income tax is charged on your net taxable income (gross sales minus allowed deductions, or the 40% Optional Standard Deduction). You apply the TRAIN tax table: the first ₱250,000 is tax-free, then rising rates of 15%, 20%, 25%, 30%, and 35% apply to each higher band of income.
＋ What is the graduated income tax table for 2026?
Under TRAIN: ₱0–250,000 is 0%; over 250,000–400,000 is 15% of the excess over 250,000; over 400,000–800,000 is ₱22,500 + 20% of the excess; over 800,000–2,000,000 is ₱102,500 + 25%; over 2,000,000–8,000,000 is ₱402,500 + 30%; and over 8,000,000 is ₱2,202,500 + 35%.
＋ Do I pay percentage tax on top of graduated income tax?
Yes. If you are non-VAT and use graduated rates, you also pay the 3% percentage tax on gross sales/receipts, filed quarterly via BIR Form 2551Q. The 8% flat-rate option skips this because it already bundles the percentage tax.
＋ What is the 40% Optional Standard Deduction (OSD)?
Instead of itemizing actual expenses, you can deduct a flat 40% of your gross sales/receipts and be taxed on the remaining 60%. It needs no receipts and often lowers your graduated tax when your real expenses are under 40% of sales.
＋ Is graduated or the 8% flat rate cheaper?
It depends on your margins. The 8% flat rate usually wins for low-expense businesses because it is a small rate on gross. Graduated rates can win when expenses are a large share of sales, because you are taxed on profit. Compute both to be sure.
Stay compliant without the stress
Compute your tax, make BIR invoices, and get free deadline reminders.
Try Resibo free →Disclaimer: This calculator and guide are general information for purely self-employed individuals (non-VAT, gross ≤ ₱3,000,000) and are not official tax advice. Rules, rates, and deadlines can change and your situation may differ. Confirm specifics with a licensed CPA or your BIR RDO. Current as of 2026.