Is 13th-Month Pay Taxable? The ₱90,000 Cap Explained (2026)

Few questions generate more confusion on a Filipino payslip than this one: is the 13th-month pay taxable? The honest, short answer is — mostly no, but with a ceiling. Under current Philippine law, your 13th-month pay is tax-exempt up to ₱90,000 per year; only the portion that exceeds ₱90,000 is added to your taxable income. This guide explains exactly where that ₱90,000 figure comes from, what else counts toward it (it is not just the 13th-month), and tackles a stubborn myth — the ₱82,917 number that some websites and calculators still quote. Every figure here reflects the law as amended by the TRAIN Law (Republic Act No. 10963), and matches what the BIR's own withholding-tax calculator does in practice.

First, What Is the 13th-Month Pay?

The 13th-month pay is a mandatory benefit created by Presidential Decree No. 851 (issued in 1975, later amended by PD 1671). It requires employers in the Philippines to pay their rank-and-file employees an amount equal to one-twelfth (1/12) of the total basic salary earned during the calendar year. A few key rules govern it:

• Who gets it: all rank-and-file employees, regardless of their position, employment status, or pay method, provided they have worked for at least one (1) month during the calendar year.
• How it is computed: total basic salary earned from January to December, divided by 12. Allowances and other monetary benefits not considered part of basic salary are excluded from the computation.
• When it is paid: not later than December 24 of each year. Pro-rata payment is allowed for employees who resign or are separated before year-end.
• It is not a "bonus" in the discretionary sense — it is a statutory entitlement. A separate, voluntary Christmas bonus given by the employer is something different (and, as we will see, also subject to the ₱90,000 ceiling).

So the 13th-month pay is a guaranteed, formula-driven amount: (basic salary × months worked) ÷ 12. The tax question is what happens to that amount when computing your withholding tax.

The Short Answer: Tax-Exempt Up to ₱90,000

Under Section 32(B)(7)(e) of the National Internal Revenue Code (NIRC), as amended by the TRAIN Law, the following are excluded from your gross income — meaning they are not taxed:

• 13th-month pay and other benefits;
• including productivity incentives and Christmas bonuses;
• up to an aggregate amount of ₱90,000 per calendar year.

Read that carefully: the ₱90,000 is a combined ceiling, not a separate exemption for each item. Your 13th-month pay, your Christmas bonus, your productivity incentive, and the taxable excess of certain allowances all go into one ₱90,000 bucket. The first ₱90,000 of that combined total is tax-exempt; anything above ₱90,000 is taxable and is added back into your gross income for withholding purposes.

For the large majority of Filipino employees, the 13th-month pay alone falls well below ₱90,000, so the entire amount is tax-free. The ceiling becomes relevant mainly for higher-paid employees, and for those who receive a 13th-month pay plus substantial bonuses in the same year.

Where Does ₱90,000 Come From? (The TRAIN Law)

The ₱90,000 figure was set by the Tax Reform for Acceleration and Inclusion (TRAIN) Law, Republic Act No. 10963, which took effect beginning 2018. During the legislative process, the bicameral conference committee agreed to raise the tax-free cap on 13th-month pay and other benefits to ₱90,000 starting 2018, replacing the much lower ceiling that applied under the older rules. That ₱90,000 amount has been the operative figure ever since, and it is the figure that the Bureau of Internal Revenue's own withholding-tax calculator applies when computing tax on compensation.

Because the ceiling is written directly into the NIRC (Section 32(B)(7)(e)) by statute, it does not change year to year unless Congress amends it. There have been periodic legislative proposals to raise it further (to ₱150,000 or more), but as of the current tax year the enacted, binding ceiling remains ₱90,000. Until a new law is passed, ₱90,000 is the number that controls your withholding.

The ₱82,917 Myth

If you have searched this topic online, you have likely seen a different number: ₱82,917. Some articles, payroll spreadsheets, and even a few calculators use it as the "tax-exempt 13th-month cap." This is incorrect. Here is how to think about it clearly:

• The enacted statute says ₱90,000. Section 32(B)(7)(e) of the NIRC, as amended by TRAIN, sets the exclusion at ₱90,000. That is the law.
• The BIR's own withholding-tax calculator uses ₱90,000. When the tax authority's official tool computes the tax on your 13th-month pay, it exempts up to ₱90,000 — not ₱82,917. Matching the BIR is the safest test of the "correct" operative figure.
• ₱82,917 does not correspond to any enacted threshold in current law. It appears to trace back to figures circulated during the drafting of the TRAIN bill and to older payroll references that were never updated. Whatever its origin, it does not reflect the law as passed.

The practical danger of the ₱82,917 figure is asymmetrical: if a payroll system under-exempts your 13th-month pay by treating ₱82,917 as the cap, it over-withholds your tax — you pay more tax during the year than the law requires (recoverable only later, if at all). The correct ceiling is ₱90,000. This site's calculator, and the BIR's own tool, both apply ₱90,000.

"And Other Benefits" — The Aggregate Cap

This is the part most employees miss. The exemption clause covers "13th-month pay and other benefits," so the ₱90,000 is shared across several items. The bucket typically includes:

• The 13th-month pay itself;
• Christmas bonuses and other cash bonuses;
• Productivity incentives;
• The taxable excess of certain allowances — for example, rice, uniform, medical, or laundry allowances paid above their de minimis limits spill into this same ₱90,000 bucket. (We cover de minimis benefits, and their separate limits, in our de minimis guide.)

The consequence: if you receive a sizeable 13th-month pay and a large Christmas bonus, the two are added together. Only the first ₱90,000 of the combined total is sheltered. The remainder is taxed as additional compensation at your marginal rate.

Worked Example 1: Fully Exempt

Consider an employee with a basic salary of ₱25,000 per month. The 13th-month pay is computed as:

13th-month pay = (basic salary × 12 months) ÷ 12 = (₱25,000 × 12) ÷ 12 = ₱25,000

Assuming no other bonuses or taxable-allowance excesses, the ₱90,000 bucket contains only ₱25,000. Since ₱25,000 is well below ₱90,000, the entire 13th-month pay is tax-exempt. None of it is added to taxable income. This is the situation for most rank-and-file employees.

Worked Example 2: Partially Taxable

Now consider a higher-paid employee with a basic salary of ₱120,000 per month. The 13th-month pay is:

13th-month pay = (₱120,000 × 12) ÷ 12 = ₱120,000

Here the ₱90,000 bucket (assuming no other benefits) contains ₱120,000. The exemption works like this:

The ₱30,000 excess is taxable. It is added to the employee's gross compensation and withheld at their marginal income-tax rate. The ₱90,000 is still fully sheltered. This is exactly how the engine on this site (and the BIR's withholding-tax calculator) treats it: exempt the first ₱90,000 of the combined bucket, tax the rest.

Worked Example 3: Bonus Eats Into the Cap

To see why the "aggregate" wording matters, suppose an employee receives a ₱70,000 13th-month pay and a separate ₱40,000 Christmas bonus. Neither figure alone exceeds ₱90,000, but together they do:

Combined bucket = ₱70,000 (13th-month) + ₱40,000 (bonus) = ₱110,000

Even though each item was under the cap, the combination pushed ₱20,000 into taxable territory. This is why the ₱90,000 ceiling must be tracked across all qualifying benefits in a year, not item by item.

How Withholding Treats the Excess

When the ₱90,000 bucket is exceeded, the employer does not simply withhold on the excess at a flat rate. Instead, the taxable excess is folded into the annual gross compensation, and withholding tax is recomputed on the updated total using the graduated withholding tables (the same 0–35% brackets applied to regular salary). In practice, because the 13th-month is paid near year-end, adding the excess can push the employee into a higher bracket for that final computation — which is why a big December payslip sometimes shows a surprisingly large withholding. The marginal-rate mechanics are explained in detail in our income tax brackets guide.

Common Mistakes to Avoid

• Using ₱82,917 as the cap. The enacted ceiling is ₱90,000. Using the wrong, lower figure causes over-withholding. Trust the ₱90,000 in the law and in the BIR's own calculator.
• Applying ₱90,000 separately to each benefit. The ceiling is shared across 13th-month pay, bonuses, productivity incentives, and certain allowance excesses — combined.
• Assuming the 13th-month is always tax-free. For high earners, or when stacked with a large bonus, part of it is taxable.
• Forgetting allowances above de minimis. Allowance amounts beyond their de minimis limits count toward the ₱90,000 bucket, not as a separate exemption.
• Confusing 13th-month pay with a discretionary bonus. The 13th-month is mandatory under PD 851; a Christmas bonus is a separate, voluntary benefit — but both share the same ₱90,000 ceiling.

Related Guides and Resources

• Income Tax Brackets Explained — the graduated 0–35% rates that apply to the taxable excess of your 13th-month pay.
• SSS, PhilHealth & Pag-IBIG — the mandatory contributions deducted before income tax is computed.
• Computing Take-Home Pay — the full path from gross salary to net, including how the 13th-month fits in.
• The main Philippine Tax Calculator — it applies the ₱90,000 ceiling for you.

Compute Your 13th-Month Tax Now

The rules are straightforward once the ₱90,000 ceiling is clear — but the arithmetic of folding the taxable excess into the graduated brackets is tedious by hand. This site's calculator applies the ₱90,000 exemption exactly as the law (and the BIR's own tool) require, so you can see the precise tax effect of your 13th-month pay and bonuses in seconds.

Frequently Asked Questions

Key Takeaways

• 13th-month pay is mandatory under PD 851: 1/12 of total basic salary earned in the year, paid by December 24.
• It is tax-exempt up to ₱90,000 per year, under NIRC Section 32(B)(7)(e) as amended by the TRAIN Law (RA 10963), effective 2018.
• The ₱90,000 is a combined ceiling covering 13th-month pay, bonuses, productivity incentives, and certain allowance excesses — not a separate cap for each.
• ₱82,917 is a myth; it does not match the enacted law or the BIR's own withholding-tax calculator, both of which use ₱90,000.
• Any amount above ₱90,000 is taxable and is withheld at your marginal graduated rate.
• For most employees the entire 13th-month pay is tax-free; the ceiling mainly affects high earners or those with large combined bonuses.