Personal Exemptions

Personal Exemptions – arbitrary amount allowed by law to be deducted from income to cover the personal living or family expenses of the taxpayer.

Kinds of Personal Exemptions

1.        BASIC PERSONAL EXEMPTIONS – individual taxpayers REGARDLESS of status are entitled to P50,000 personal exemptions.

·         Under RA 9504 (RR 1-2009) which took effect July 6, 2008, individual taxpayers are just classified as “single” or “married” entitled to a uniform amount of personal exemption.

·         In case of married individuals where only one of the spouses is deriving gross income, only such spouse shall be allowed personal exemption.

·         Henceforth, a benefactor of a person with disability whose civil status is single could no longer be classified as head of the family (RR 1-2009).

2.        ADDITIONAL EXEMPTIONS – allowable as additional  exemption of P25,000 for each qualified dependent child not exceeding 4 dependents.  May be claimed by individual taxpayers, either married or single.

A “dependent” means, a legitimate, illegitimate, or legally adopted child, chiefly dependent upon and living with the taxpayer if such dependent is:

(amendment brought about by RA9504. Refer also to RR 1-2009).

·         Not more than 21 years of age

·         Unmarried

·         Not gainfully  employed, or

·         Or if such dependent regardless of age, is incapable of self-support because of mental or physical defect

Chief Support

·         Principal or main support, regular, and continuing.  Financial or other material support extended to the dependent; if such support is withdrawn, the dependent will live a destitute life unless similar support or livelihood is provided by the others.

Additional NOTES:

Ø  Only one of the spouses may claim additional exemption

Ø  As a rule, husband is deemed head of the family and proper claimant of additional exemption

Ø  Wife may claim the additional exemption if:

a.        Husband explicitly waives his right (in the withholding exemption certificate in favor of his wife)

b.        Husband has no income

c.        Husband works abroad

Ø  For legally separated spouses – claimant is the spouse who has custody of the child/children.  Total amount of additional exemption shall not exceed the allowed maximum amount.

Ø  Taxpayers NOT ENTITLED to personal exemptions

a.        NRA-ETB and there is no reciprocity; and (b) NRA-NETB

Ø  Personal exemptions for NRA

a.        The NRA must be ETB or exercising his profession in the Philippines

b.        There is reciprocity – the foreign country in which the NRA is a subject as citizen allows personal exemptions to citizens of the Philippines not residing therein.

c.        The NRA files a true and accurate return of total income from all sources within the Philippines

Ø  Change of Status

a.        If during  the taxable year, the taxpayer marries or should have additional dependents, the taxpayer may claim the corresponding personal or additional exemption in full for such year.

b.        If the taxpayer dies during the taxable year, his estate may still claim personal and additional exemptions for himself and dependents as if he died at the close of such year.

c.        If during the taxable year, the spouse dies, or marries, or becomes 21 years old, or becomes gainfully employed, the taxpayer may still claim the same exemptions as if any of the above happened at the close of such year.

d.        If the spouses , with qualified dependent children , became legally separated during the taxable year, their combined additional exemptions should not exceed the maximum amount of P32,000.

e.        If there are no specific rules applicable from those above mentioned, the status of the taxpayer at the end of the year shall determine his personal exemptions

Premium Payments on Health and/or Hospitalization insurance.

·   For individuals, premiums paid during the taxable year for health and/or hospitalization insurance taken out by him on himself, including his family will be allowable as a deduction from the gross income of the individual who has:

a.        Gross compensation income only;

b.        Gross income from self-employment only (business income); or

c.        Mixed gross income (“a” and “b”, above)

The following conditions must be met:

a.        The insurance shall be taken by the individual taxpayer himself for his family.

b.        The amount being claimed shall not exceed P2,400 a year or P200 a month per family.

c.        The family has gross income of P250,000 or less for the taxable year.

·         For married taxpayers, only the spouse entitled to claim for additional exemption is allowed this deduction.

·         May be claimed by:

-  Resident citizen

-  Nonresident citizen; and

-  Resident alien

·         “Total Family Income” means primary income and other income received by all members of the family (father, mother, unmarried children living together, or a single parent with children)..

SUMMARY OF ALLOWABLE EXEMPTIONS:

	Taxpayer	Basic Personal Exemption	Additional Personal Exemption	Health &or Insurance Premium
1.	Resident citizen	Allowed	Allowed	Allowed
2.	Nonresident citizen	Allowed	Allowed	Allowed
3.	Resident alien	Allowed	Allowed	Allowed
4.	Nonresident alien ETB w/ Reciprocity	Allowed	Allowed	X
5.	Nonresident alien ETB wo/ Reciprocity	X	X	X
6.	Nonresident alien NETB	X	X	X