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Understanding the TRAIN Law: How It Affects Your Salary

The Tax Reform for Acceleration and Inclusion (TRAIN) Law (Republic Act No. 10963) restructured the Philippine tax system to provide relief for most employees. Under these guidelines, taxable income is calculated after deducting your mandatory contributions (SSS, PhilHealth, and Pag-IBIG).

Key Tax Benefits for Employees:

Tax-Exempt Threshold: If your annual taxable income is ₱250,000 or below, you are 100% exempt from personal income tax.

Higher Bonus Limits: Your 13th-month pay and other benefits are non-taxable up to a combined total of ₱90,000.

Graduated Rates: For those earning above the threshold, tax rates range from 15% to 35% (effective 2023 onwards).

For Freelancers & Professionals:

Self-employed individuals with gross sales/receipts below ₱3M can opt for a simplified 8% flat tax rate on the excess of ₱250,000, or follow the graduated income tax set by the BIR.

Source: Department of Finance

Understanding the Pag-IBIG Fund (HDMF) Contribution

The Pag-IBIG Fund (HDMF) implemented a significant update effective February 2024, which remains the standard for 2026. The Maximum Fund Salary (MFS) was increased from ₱5,000 to ₱10,000. This change was designed to help members save more for their retirement and increase their potential housing loan amounts.

Source: Pag-IBIG (HDMF)

Tax-Deductibility of Contributions: Your Pag-IBIG contribution is deducted from your Gross Salary before income tax is computed. This means higher contributions slightly lower your taxable income.

Source: Republic Act No. 8424 (National Internal Revenue Code of 1997)

The Employer Match: By law, your employer must match your 2% contribution. If you are self-employed, you are responsible for both the employee and employer shares (4% total).

Source: Republic Act No. 9679 (Pag-IBIG Fund Law of 2009)

Kasambahay Rules: For domestic workers earning less than ₱5,000, the employer is legally required to shoulder the entire contribution (both the employee and employer shares).

Source: Republic Act No. 10361 (Domestic Workers Act or Batas Kasambahay)

PhilHealth Contribution Guide 2026

As of January 2026, the PhilHealth premium rate remains stabilized at 5%, following the scheduled increases mandated by Republic Act No. 11223 (Universal Health Care Act). This rate applies to all Direct Contributors, including employees, freelancers, and OFWs.

Source: PhilHealth Circular No. 2019-0009

Important Rules & Guidelines for 2026

To ensure your salary deductions are accurate, keep these official PhilHealth policies in mind:

The Salary Ceiling: For 2026, the income ceiling is fixed at ₱100,000. Even if you earn ₱150,000, your total contribution will not exceed the ₱5,000 cap.

The Salary Floor: The minimum monthly basic salary used for computation is ₱10,000. If you earn less than this, your contribution is still based on the ₱10,000 floor (₱500 total).

Equal Sharing: For formally employed workers, the 5% premium is split exactly 50/50 between the employer and the employee.

Self-Employed & OFWs: Individuals in these categories are responsible for the full 5% premium. However, OFWs' contributions are often based on their declared income or a set minimum (per PhilHealth Advisory No. 2024-004).

Source: Republic Act No. 11223 (Universal Health Care Act)

Social Security System (SSS) Contribution Guide 2025

The Social Security System (SSS) completed its final scheduled contribution increase under Republic Act No. 11199 (Social Security Act of 2018) in January 2025. For the 2026 calendar year, the contribution rate remains at 15% of the Monthly Salary Credit (MSC).

Current SSS Contribution Table (2025–2026)

For employed members, the 15% contribution is shared: 10% from the employer and 5% from the employee.

The Mandatory MySSS Pension Booster (WISP)

A critical feature of the current system is the Mandatory Provident Fund, now known as the MySSS Pension Booster.

• Automatic Enrollment: If your Monthly Salary Credit (MSC) is above ₱20,000, the portion of your contribution exceeding that threshold is automatically diverted to this tax-free savings account.
• Benefit: This fund earns investment income and is paid out as an additional benefit (on top of your regular pension) upon retirement, disability, or death.

Source: Philippine SSS Circular No. 2024-006