I. Introduction

The Tax Reform for Acceleration and Inclusion (TRAIN) Law, or Republic Act No. 10963, reshaped the Philippine income tax system starting 1 January 2018. One of its most consequential changes for individual taxpayers was the abolition of personal and additional (dependent) exemptions under the National Internal Revenue Code (NIRC) of 1997, as amended.

This article explains, in a Philippine legal context:

How dependent exemptions worked before TRAIN
What TRAIN changed and how it affects taxpayers with dependents
The continuing relevance (and limits) of the concept of “dependents” in tax law after TRAIN
Common issues and questions arising from these changes

II. Legislative Framework

A. The TRAIN Law and the NIRC

TRAIN is the first package of the Comprehensive Tax Reform Program (CTRP). Among others, it:

Introduced new personal income tax (PIT) schedules
Removed personal and additional (dependent) exemptions
Increased the tax-exempt threshold for compensation income to ₱250,000 per year

These changes are implemented through amendments to the NIRC of 1997, particularly the provisions on individual income taxation and deductions.

B. Pre-TRAIN Rule: Personal and Dependent Exemptions

Before TRAIN took effect (for taxable years up to 31 December 2017):

Every individual taxpayer was entitled to a personal exemption (generally ₱50,000).
In addition, a taxpayer could claim additional exemptions for “qualified dependents”, at ₱25,000 per dependent, up to a maximum of four (4) dependents (₱100,000).

Thus, a married individual with four qualified dependent children could enjoy:

₱50,000 (personal exemption)
₱100,000 (4 dependents × ₱25,000)
Total: ₱150,000 as a deduction from gross income for income tax purposes.

This is what TRAIN effectively removed.

III. Abolition of Dependent Exemptions Under TRAIN

A. Repeal of Personal and Additional Exemptions

TRAIN amended the NIRC such that personal exemptions and additional exemptions for dependents are no longer allowed for income earned beginning 1 January 2018.

Key consequence:

There is no longer any “dependent exemption” that directly reduces taxable income.
The former rules allowing ₱25,000 per qualified dependent (up to four dependents) are now purely historical and apply only when dealing with taxable periods before TRAIN.

For post-TRAIN years, whether a taxpayer has zero or five children does not change the computation of income tax through exemptions.

B. Replacement: The ₱250,000 Zero-Tax Bracket

Instead of exemptions, TRAIN uses a 0% tax bracket for the first ₱250,000 of taxable income for individuals. In effect, this is a built-in “basic allowance,” but it is:

Uniform for all individual taxpayers
Not dependent-related
Embedded in the tax table rather than claimed as a separate deduction

Example (simplified):

A single employee earning ₱250,000 per year in purely compensation income pays 0 income tax.
A married employee with dependents, earning the same ₱250,000, also pays 0 income tax.

The presence of dependents no longer affects the tax formula itself.

C. Application to Different Types of Taxpayers

Purely Compensation Income Earners
- No personal or dependent exemptions.
- Employer uses the TRAIN withholding tax table, which already assumes the ₱250,000 0% bracket.
Self-Employed and Professionals (SEPs)
- They choose between:
  - Graduated tax rates (with the same ₱250,000 0% band), or
  - 8% tax on gross sales/receipts in excess of ₱250,000 (subject to conditions).
- In either case, dependents do not create separate exemptions.
Mixed-Income Earners (both compensation and business/professional income)
- The interaction of the ₱250,000 threshold is more technical, but still not dependent-based.
- There is no longer any additional “allowance” for dependents in their tax computation.

IV. The Concept of a “Dependent” – Historical Rules

Even though dependent exemptions are gone for post-TRAIN periods, it is useful to understand how they used to work, especially when:

Amending or examining pre-2018 income tax returns, or
Responding to BIR audits for past years.

A. Qualified Dependent Child (Pre-TRAIN Definition)

Historically, a “qualified dependent child” generally had to meet all of the following:

Relationship – Legitimate, illegitimate, or legally adopted child of the taxpayer.
Age – Below 21 years old;
- Or regardless of age if suffering from a mental or physical defect that renders the child incapable of self-support.
Civil Status – Unmarried.
Support and Living Arrangement – Chiefly dependent upon and living with the taxpayer.

These conditions ensured that the tax benefit was targeted at children genuinely supported by the taxpayer.

B. Limitation to Four Dependents

A taxpayer could claim additional exemptions for up to four (4) qualified dependents.
Even if there were more than four children who satisfied the criteria, the law capped the number that could be claimed for exemption purposes.

C. Allocation Between Spouses

For married taxpayers, only one spouse could claim the additional exemptions for a particular dependent. Double-counting was not allowed.
Spouses were required to agree on who would claim which dependents.

D. Timing Rules (Historical)

Pre-TRAIN rules commonly included timing principles such as:

A child born within the taxable year could generally be claimed as a full dependent for that year.
If a dependent died, married, or turned 21 within the taxable year, the full additional exemption could typically still be claimed for that year (subject to specific rules).

All of these now matter only for tax years prior to TRAIN and do not apply to income earned from 2018 onwards.

V. Practical Effect of TRAIN on Taxpayers with Dependents

A. No More Dependent-Based Deductions

From TRAIN onwards, the presence of dependents does not reduce taxable income via exemptions. Practical implications:

A single taxpayer and a married taxpayer with four children, earning the same income, now have the same tax base under the income tax law.
Childbirth, marriage, or changes in family status no longer trigger changes in personal exemptions.

B. Fairness and Ability-to-Pay Concerns

From a policy perspective, this is often debated:

Pro-TRAIN view:
- System is simpler and easier to administer.
- Lower tax rates and the ₱250,000 0% bracket benefit everyone, including those with families.
Critiques:
- Tax no longer explicitly distinguishes between taxpayers with and without dependents, even though their capacity to pay may differ.
- Families with multiple dependents may effectively bear a heavier burden compared with the pre-TRAIN regime.

These are policy debates and do not change the clear legal rule: dependent exemptions no longer exist for income tax computation.

VI. Dependents in Other Tax-Related Contexts After TRAIN

While dependent exemptions for individual income tax are gone, the concept of a dependent or family member still appears in various tax and quasi-tax contexts. Examples include:

Fringe Benefit Tax (FBT)
- Benefits given by an employer to an employee’s family members or dependents may still fall within the scope of fringe benefits, taxed at the employer level.
- The existence of dependents here affects who is considered a recipient of a fringe benefit, not the employee’s income tax exemption.
Special Laws Protecting Persons with Disabilities (PWDs)
- Prior to TRAIN, there were special rules allowing additional dependent exemptions for disabled children or parents under specific legislation.
- Once TRAIN removed all personal and additional exemptions, those income-tax-based benefits effectively disappeared for post-2017 income, although non-income-tax benefits (such as discounts and VAT-related privileges for PWDs) remain under their respective special laws.
Social and Labor Legislation
- Other statutes (e.g., solo parent benefits, labor standards, social welfare programs) may grant advantages based on dependents, but these are not income tax exemptions under the NIRC. They operate separately from TRAIN.

The key takeaway: a person may still be treated as a “dependent” for other laws, but that does not produce an income-tax deduction or exemption after TRAIN.

VII. Compliance and Transitional Issues

A. Claims for Years Before and After 2018

Pre-TRAIN Years (e.g., 2017 and earlier)
- Personal and additional exemptions still apply.
- Taxpayers undergoing BIR audit or filing amended returns may still rely on the old dependent rules for those periods.
TRAIN Years (2018 onwards)
- Any attempt to claim additional exemptions for dependents in the income tax return is contrary to the current law and will be disallowed.
- Taxpayers should ensure that they are using updated forms and post-TRAIN instructions when preparing returns.

B. BIR Audit Considerations

For audits covering several years straddling TRAIN’s effectivity date, BIR examiners may:

Examine birth certificates or proof of dependency for pre-2018 years only, where relevant.
Disallow any claimed exemptions for dependents in post-TRAIN years and assess corresponding deficiency income tax, plus surcharges and interest.

Taxpayers should clearly distinguish, in their records and computations, between:

Periods when dependent exemptions were legally available, and
Periods when TRAIN had already abolished them.

VIII. Common Questions

1. Can I still claim my children as dependents to lower my income tax?

No. Under TRAIN, there are no more additional exemptions for dependents for income earned from 1 January 2018 onwards. Your number of children or dependents does not directly reduce your taxable income for income tax purposes.

2. Does my marital status or being a “head of family” affect my income tax?

For income tax under TRAIN:

Being single, married, or a head of family does not change the basic tax computation.
Everyone is subject to the same tax table and ₱250,000 0% bracket.

There may be separate benefits under labor or social welfare laws, but those are not income-tax exemptions.

3. What about a dependent child or parent with a disability (PWD)?

Before TRAIN, there were specific rules allowing additional exemptions for PWD dependents.
After TRAIN removed personal and additional exemptions, those income-tax-based benefits effectively ended for post-2017 income.
Families with PWD members may still benefit from discounts, VAT relief, and other privileges under PWD-related laws, but these do not take the form of dependent exemptions under the TRAIN-amended NIRC.

4. Do I need to update my employer about my dependents for tax purposes?

For individual income tax computation under TRAIN, no, because dependents no longer affect the calculation. However:

Employers may still require family information for HR, benefits, insurance, or other non-tax reasons.

IX. Policy Perspective and Possible Future Changes

The removal of dependent exemptions is a clear legislative policy choice:

Simplicity and efficiency – fewer variables in tax computation; easier withholding and filing.
Broad-based rate reduction – the strategy was to lower rates and give everyone a relatively high tax-free threshold rather than customizing relief by family situation.

However, because it may affect equity between taxpayers with similar incomes but different family sizes, debates and proposals sometimes arise to:

Reintroduce some form of family- or dependent-based relief, or
Shift relief to targeted social programs rather than tax deductions.

Any such changes would require new legislation amending, once again, the NIRC.

X. Conclusion

Under the TRAIN Law in the Philippines:

Personal and additional exemptions, including dependent exemptions, have been abolished for income earned from 1 January 2018 onwards.
The old rules on qualified dependents (age, relationship, support, limit of four, etc.) now matter only for pre-TRAIN taxable years.
The relief formerly granted through dependent exemptions is now effectively replaced by a uniform ₱250,000 0% tax bracket, which does not depend on family status.
While the concept of “dependents” survives in other legal contexts (e.g., fringe benefits, PWD laws, social welfare programs), it no longer generates income-tax exemptions under the TRAIN-amended NIRC.

For specific cases—especially those involving multiple years, special circumstances (e.g., PWD dependents), or BIR audits—it is prudent to consult a tax professional or seek formal guidance from the BIR, since correct treatment can depend on the precise taxable year and facts involved.