8% vs Graduated Tax Calculator Philippines 2026
For freelancers, professionals and small business owners who are not VAT-registered. Compare the 8%income tax option with graduated rates, so you can choose before your first-quarter return. Everything is computed on your device.
Last updated:
Compare your tax options for the year
Lowest tax for the year
You are a mixed-income earner. Your salary is taxed at graduated rates in every option.
Your sales are above the VAT threshold of ₱3,000,000.00. You are taxed at graduated rates and are liable to VAT, which this calculator does not compute.
Enter your business expenses to also compare itemized deductions.
Choose the 8% option in your first-quarter percentage tax and/or income tax return (or your first quarterly return if your business is new). If you don't, you are taxed at graduated rates. The choice cannot be changed for the rest of the year.
Your options
1. The 8% option
8% of your gross sales or receipts and other non-operating income above ₱250,000.00. It replaces both the graduated income tax and the 3% percentage tax. It is only for non-VAT taxpayers whose gross sales/receipts and other non-operating income do not exceed ₱3,000,000.00. If you are also employed, the ₱250,000.00 is not deducted.(NIRC Sec. 24(A)(2)(b)–(c); RR 8-2018)
2. Graduated rates
Your net income is taxed using the graduated rates below. You can deduct either your actual expenses (itemized) or a flat 40% of gross sales or receipts (optional standard deduction). You also pay 3% percentage tax on your gross sales or receipts if you are not VAT-registered.(NIRC Sec. 34(L); NIRC Sec. 116 as amended)
| Taxable income for the year | Tax |
|---|---|
| Not over ₱250,000 | ₱0 |
| Over ₱250,000 but not over ₱400,000 | 15% of the excess over ₱250,000.00 |
| Over ₱400,000 but not over ₱800,000 | ₱22,500.00 + 20% of the excess over ₱400,000.00 |
| Over ₱800,000 but not over ₱2,000,000 | ₱102,500.00 + 25% of the excess over ₱800,000.00 |
| Over ₱2,000,000 but not over ₱8,000,000 | ₱402,500.00 + 30% of the excess over ₱2,000,000.00 |
| Over ₱8,000,000 | ₱2,202,500.00 + 35% of the excess over ₱8,000,000.00 |
Worked examples
Example 1: Freelancer earning ₱1,000,000 a year, no other job
- 8% option: 8% × (₱1,000,000.00 − ₱250,000.00) = ₱60,000.00
- Graduated + OSD: taxable income ₱600,000.00 → income tax ₱62,500.00 + percentage tax ₱30,000.00 = ₱92,500.00
Example 2: Employee with ₱400,000 taxable salary and ₱500,000 freelance income
- 8% option: tax on salary + 8% × ₱500,000.00 (no ₱250,000.00 deduction) = ₱62,500.00
- Graduated + OSD: combined taxable income ₱700,000.00 → ₱97,500.00 including percentage tax
Frequently asked questions
Should I choose the 8% option or graduated rates?
If your business expenses are small, the 8% option is often lower, because it also replaces the 3% percentage tax. If your expenses are large, graduated rates with itemized deductions can be lower. Enter your figures above to compare.
How do I choose the 8% option?
Choose the 8% option in your first-quarter percentage tax and/or income tax return (or your first quarterly return if your business is new). If you don't, you are taxed at graduated rates. The choice cannot be changed for the rest of the year.
Do I still pay percentage tax if I choose 8%?
No. The 8% tax is in place of both the graduated income tax and the 3% percentage tax.
I am employed and also have a side business or freelance work. How am I taxed?
Your salary is taxed at graduated rates. For your business income you can still choose 8%, but on your whole gross receipts: the ₱250,000.00 deduction is only for people who are purely self-employed, because it is already built into the 0% bracket of your salary's tax.
What if my sales go above ₱3,000,000.00?
If your gross sales/receipts and other non-operating income go above the VAT threshold during the year, you are automatically taxed at graduated rates for the year, with credit for the 8% tax already paid, and you become liable to VAT.
What is the optional standard deduction (OSD)?
Instead of listing your actual expenses, you can deduct a flat 40% of your gross sales or receipts. You choose it in your return, and the choice applies for the whole year.
Who cannot use the 8% option?
VAT-registered taxpayers; taxpayers subject to other percentage taxes (other than the 3% percentage tax under Sec. 116); and partners of a general professional partnership, for their share from the partnership. It is also not available if your gross sales/receipts and other non-operating income are above ₱3,000,000.00.
Related
- Take-Home Pay Calculator (for your salary)
- 13th Month Pay Calculator
Sources
- Republic Act No. 10963 (TRAIN Law), amending NIRC Sec. 32(B)(7)(e)
- BIR Revenue Regulations No. 8-2018 (income tax provisions of TRAIN)
- Republic Act No. 9504, Sec. 3 (NIRC Sec. 34(L): optional standard deduction)
- Republic Act No. 11534 (CREATE), Sec. 13 (NIRC Sec. 116: percentage tax)
- Republic Act No. 11976 (Ease of Paying Taxes Act): Sec. 18 (VAT threshold) and Sec. 24 (percentage tax)
This is an annual estimate for individual citizens and resident aliens. It does not compute VAT, quarterly payments, or creditable withholding taxes already deducted by your clients.
Last updated: