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Tax reduction: Something to look forward to in 2018

There will be significant tax reduction for Filipinos this 2018. The Senate and Congress is giving us an early gift for 2018 when both houses agreed to raise the annual tax exemption up to Php250,000. That means anyone who is earning Php250,000 and below would be exempted from paying ANY taxes starting 2018. Could you imagine that? A clean payslip with no tax deduction? Sweet!

So you if you are earning more than that, what does that mean to you? So here is the thing The first Php250,000 will be exempted and anything on top of the that will be taxable. Huh? Yes I know right! For those people more than the annual tax exemption but before you start getting stress, this is what it actually means

If you are earning over Php250,000 but not over Php400,000, you would have to pay only 20% of the excess of Php250,000.

Example: Your annual Salary is Php400,000, the first Php250,000 is exempted

Php400,000 – Php250,000 = Php150,000 (this is your taxable income)

Php150,000 X 20% = (Drum roll please) Php30,000.

You might by shouting “What!” by now. Yes I know you don’t want to pay taxes too. Who would? Here is the thing, based  on the current tax could, A person that is earning that much money annually is obligated to pay Php95,000. That is a significant tax reduction of Php65,000. You can use that amount of money to a better use.

For the rest of the folks who are earning more than the tax exemption, here is the new income tax schedule for 2018

Over Php250,000 but not over Php400,000 = 20% of the excess over Php250,000

Over Php400,000 but not over Php800,000 =P30,000 + 25% of the excess over Php400,000

Over Php800,000 but not over Php2 million =P130,000 + 30% of the excess over Php800,000

Over Php800,000 but not over Php8 million =P490,000 + 32% of the excess over Php2 million

Over Php8 million =Php2,410,000 + 35% of the excess over P8 Million

 

Just hold on! Before start purchasing something like a gadget that you have been wanting for quite a long time, here is something that you should know. Although the Philippine Senate and Congress has agreed on the new tax schedule for 2018, this has not been approved by the President. So wait for it for a few more days maybe this might become a reality. But remember everything comes with a price. Despite getting a higher take home pay, there would be additional taxes else where. It is pretty obvious they to get their money else where.

They are still discussing how much tax or additional tax would they add to automobiles, Sugar-sweetened beverages and fuel. Sugar sweetened beverages? Yup say goodbye to your sugar rush! Also say goodbye in getting your dream car next year. Well not really it would be more expensive though to purchase a new automobile and maintain the cost as there are proposal to increase the taxes on fuel.

This is all great for those middle class income earners and those above. But what does this mean for small business owners like sari-sari store who sells Soda in bulk. Their income would surely be affected if there are significant price increase for beverages. Would transportation fare increase as well with the propose tax increase for fuel? Would Electricity cost more as well? That is still something that we have to wait for.

I guess in a general sense it would be great if this tax relief would be approved and implemented in 2018 but we still have to wait and speculate if there are going significant changes with the prices of other commodities.

What are your thoughts?

Thanks for dropping by and Screw Monday!

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