Navigating the complexities of the Philippine tax system requires a clear understanding of the National Internal Revenue Code (NIRC) and subsequent legislative amendments. One area of frequent inquiry for Filipino taxpayers is the ability to claim parents as dependents to reduce taxable income.
Since the enactment of Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the landscape of personal exemptions has undergone a fundamental shift.
1. The Pre-TRAIN vs. Post-TRAIN Era
Prior to January 1, 2018, taxpayers were entitled to a "Basic Personal Exemption" and "Additional Exemptions" for qualified dependents (including parents in specific cases of disability).
- Under the TRAIN Law: The concept of personal and additional exemptions has been repealed.
- The Current Rule: Individual taxpayers are now granted a standard Personal Exemption in the form of a significantly higher tax-exempt threshold. Currently, individuals earning an annual gross income of ₱250,000 or below are exempt from paying personal income tax.
Consequently, from a strictly technical "Income Tax Return (ITR) deduction" standpoint, you can no longer "claim" a parent to subtract a specific fixed amount (e.g., the old ₱25,000) from your taxable income.
2. Senior Citizen Benefits and Indirect Tax Exemptions
While the direct deduction on income tax is gone, the Philippine government provides substantial indirect tax benefits for children supporting their parents under Republic Act No. 9994 (Expanded Senior Citizens Act of 2010).
To be considered a "benefactor" of a senior citizen, the parent must be:
- At least 60 years old.
- A Filipino citizen.
- Dependent upon their children for primary support.
Benefits for the Parent
While the child does not get a tax deduction, the parent receives:
- 20% Discount and 12% VAT Exemption: On medicines, professional fees of attending physicians, medical and dental services, and transport fares (land, air, and sea).
- Exemption from Training Fees: For socio-economic programs.
- Free Medical/Dental Services: In government facilities.
3. The "Head of Family" Status
Under the old system, supporting a parent could qualify a taxpayer for the "Head of Family" status. With the TRAIN Law, the tax tables were simplified. Whether you are single, married, or head of a family, the tax rates remain the same based solely on your income brackets.
| Taxable Income (Annual) | Tax Rate |
|---|---|
| ₱250,000 and below | 0% |
| Over ₱250,000 to ₱400,000 | 15% of excess over ₱250,000 |
| Over ₱400,000 to ₱800,000 | ₱22,500 + 20% of excess over ₱400,000 |
| Over ₱800,000 to ₱2,000,000 | ₱102,500 + 25% of excess over ₱800,000 |
4. Health Insurance Premium Deductions
Another historical deduction was the ₱2,400 annual deduction for health and/or hospitalization insurance premiums (provided family income did not exceed ₱250,000).
Important Note: Similar to personal exemptions, the TRAIN Law also removed the deductibility of health insurance premiums for individual taxpayers.
5. Legal Obligations for Parental Support
While the tax code has moved away from individual exemptions, the Family Code of the Philippines (Executive Order No. 209) maintains the legal obligation of children to support their parents.
- Article 194: Support comprises everything indispensable for sustenance, dwelling, clothing, medical attendance, education, and transportation.
- Article 195: Specifically lists that parents and their legitimate children are obliged to support each other.
Failure to provide support to a parent in need, when the child has the capacity to do so, can lead to civil actions for support under Philippine law.
Summary Table: Tax Impact of Supporting Parents
| Feature | Pre-2018 Status | Current Status (TRAIN Law) |
|---|---|---|
| Additional Exemption | ₱25,000 per dependent | Repealed |
| Basic Personal Exemption | ₱50,000 | Repealed (Replaced by ₱250k threshold) |
| Head of Family Status | Provided higher exemption | Irrelevant for tax rate calculation |
| VAT Exemption | Available for Senior Citizens | Maintained (Benefit stays with parent) |
| Health Insurance Deduction | ₱2,400 (conditional) | Repealed |
Conclusion
In the current Philippine legal framework, the "tax exemption" for claiming parents has been integrated into the overall higher tax-exempt ceiling of ₱250,000. Taxpayers no longer list parents as dependents on their ITRs to lower their tax base. Instead, the government focuses on providing direct discounts and VAT exemptions to the parents themselves through the Senior Citizens Act, shifting the financial relief from the taxpayer’s annual filing to the parent's daily point-of-purchase transactions.