Many of us, employees and businessmen alike, pay huge amounts of taxes without having to understand the true meaning behind what we are paying for.
In this article, I would like to enlighten you with some ways on how to minimize your taxes using legal means. And this is with the use of tax deductions as given by our government.
First is the Personal Exemption. This has been revised and what we are using now is P50,000.00. There is no difference if you are the head of the family, single or married. This amount is automatically deducted to your gross income. (Gross income is the total of all of your income for the year, without deductions.)Second deduction that you should know about is the Additional Exemption. This is in the amount of P25,000.00 for every qualified dependent but is only limited to 4 dependents, i.e. maximum amount is P25,000.00 x 4 = P100,000.00.
Who can claim this additional exemption? According to the Bureau of Internal Revenue (BIR), the following can claim additional exemption:
- The husband who is deemed the head of the family unless he explicitly waives his right in favor of his wife
- The spouse who has custody of the child or children in case of legally separated spouses. Provided, that the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions allowed by the Tax Code.
- The individuals considered as Head of the Family supporting a qualified dependent
Who are your qualified dependents? These means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.
These are only some of the deductions or exemptions which you can use while computing your taxes. You can use these to legitimately minimize you income taxes.
I hope you were able to get an idea on how income taxation works. In my next blogs, I will be discussing about your income and other deductions that you can use in computing for your taxes.
Thank you for reading! =)
