13th-Month Pay: Guide on the Limit Set for Tax Exemption on 13th Month Pay

Guide on 13th-Month Pay Tax Rules in PH

13TH-MONTH PAY – Are you wondering if which amounts of this holiday pay during December are exempted from tax deductions?

Every December, one of the things that most employee awaits is the 13th-month pay. Many workers allot the amount that they will receive among the bills that need to be paid, the food expenses for special events like Christmas and New Year, the gifts to buy for loved ones, etc.

Some people also make sure that a part of their money would go to self-relaxation or self-pampering. Some individuals settle with a spa while others would love to go on trips to the beach or mountain tops with their family and friends. To some, it is like a breather before another year would start.

However, the COVID-19 pandemic has greatly affected the finances of most people now. It is more than a year now since the situation in the Philippines started to become unstable. Some businesses closed and many people lost their work.

13th-Month Pay
Photo: Radyo Todo

In some cases, a lot of employees incurred huge loans just to be able to cope with the financial struggles amid the pandemic. Thus, many people are hoping that their 13th-month pay can cover much of what they really need to do and to pay for.

Many employees are curious if the 13th-month pay is taxable. Based on a report on ABS-CBN News, yes it is but it depends as there is a limit set on the tax rules regarding it. Previously, the limit was set at P82,000.00 – any amount that goes above it is taxable.

According to the report, due to the Republic Act No. 10963, the cap on the tax for the 13th-month pay was adjusted to P90,000.00. Only the excess is subject to the income tax so if your pay is P110,000.00, only the P20,000.00 will be subject to the tax rules.

You may also visit – How To Compute your 13th Month Pay

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