Personal Exemption – Basic and Additional Exemption for Individual Taxpayers

Net taxable income is determined by deducting the allowable deductions from gross income. Individual taxpayers who earn solely compensation income, business income, or a combination of both business and compensation income are entitled to deduct from their gross earnings the allowable Personal exemptions which compose of basic exemption and certain additional exemptions.

In the case of a non-resident alien engaged in trade or business, the reciprocity rule applies to the claiming of the personal exemption (that is the amount of personal exemption allowed to non-resident alien is limited to the amount of personal exemption granted by,  his/her home-country to Filipino citizens working in that said country). Moreover, non-resident aliens are not entitled to the additional exemption for dependent children.

Individuals deriving business income are allowed to deduct all ordinary and necessary expenses paid or incurred in carrying on or which directly attributable to the carrying on of the development, management, operation, and/or conduct of his/her trade, business, or profession. Any amount of allowable personal or additional exemptions not fully utilized (that is not fully applied) against the compensation income shall likewise be allowed as deduction.

How much is the Personal Exemption and Additional Exemption of an Individual?

Basic Exemption

The basic personal exemption allowable to citizens, resident aliens, and/or non-resident aliens engaging in trade or business amounts to P50,000. This exemption is allowed irregardless of status.

Additional Exemption

An additional exemption of Php25,000 for each qualified dependent, up to four dependent children can also be claimed by citizens and residents. In case of married individuals electing to compute their income tax liabilities separately, one spouse can claim the additional exemption for dependents. Here are the children allowed as additional exemptions by the BIR:

  • Legitimate child
  • Illegitimate child
  • Legally adopted child

These said dependents are allowed to be claimed as additional exemption as long as they are not more than twenty-one (21) years old, unmarried and not gainfully employed or if such dependent regardless of age has mental or physical problem, who is not capable of self-support. It should be noted that additional exemptions are allowed to be deducted up to a maximum of four dependent children only.

Deduction for Health and Hospitalization Premiums

An additional deduction of Php2,400 per family or Php200 per month paid for health and/or hospitalization insurance will be allowed if the gross income of the family does not exceed the aggregate amount of Php250,000 for the taxable year.

Examples:

1. Mrs. Noelita is married to Mr. Mac, and is living with her 2 minor children. Her husband waives his right to claim exemptions. How much is the total exemption of Noelita?

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2. Lady G., a single taxpayer, is supporting his studies and living with his parents. His much is his total exemption?

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3. Mrs. Amy is married to Mr. Bean. She supporting the education of her younger brother, who is still a minor, and they have 1 child, a minor. Mr. Bean waives his right to claim the exemptions. How much is the total exemption of Mrs. Amy?
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4. Jimmy, a resident citizen, owns a passenger vessel in Batangas Port. His wife, Jenelyn, also a resident citizen is a Certified Public Accountant working in Punongbayan and Araullo. In 2017, Jenelyn gave birth to twins. What is the additional exemption allowed to Jimmy and Jenelyn?

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5. Jenelyn got married in 2013. She and her husband were blessed with baby girl in the same year. Her husband waived his right to claim the additional exemption. What is the additional exemption allowed to Jenelyn?

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