BIR Income Tax Allowable Deductions - Personal Exemptions

All individual tax payers are allowed a personal exemption of Php50,000. In addition, individual tax payers are allowed additional exemption of Php25,000 for each qualified dependent child (QDC), provided that the total number of dependents shall not exceed four (4) dependents. The additional exemptions for QDC shall be claimed by ONLY ONE of the spouses in the case of married individuals.

Example: A freelancer has Php200,000 income and Php40,000 freelancing related expenses for the year and is single. Tax calculation would be as follows:

Total Freelance Fees = Php200,000

Less: Deductions

Operating Expenses = Php40,000

Personal Exemption (single with no dependent) = Php50,000

Net Taxable Income (Php200k - 40k - 50k) = Php110,000

Qualified dependent child means a legitimate, illegitimate or LEGALLY ADOPTED CHILD chiefly dependent upon and living with the taxpayer if such dependent is not more than 21 years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect. (RR 10-2010).

To claim additional exemption for qualified dependent child you need to file BIR Form 2305.

TIPS:

1. You CANNOT claim additional exemptions for your dependent parents, minor siblings or relatives (unless you have legally adopted them).

2. You CAN claim dependents (children) who are incapable of self-support due to mental or physical defect REGARDLESS OF AGE (even more than 21 years old).  Medical certificate maybe required by BIR when you file Form 2305.