A self-employed resident citizen taxpayer, who is married, has gross profit from sales of goods of P1,200,000, operating expenses of P400,000, cost of goods sold of P500,000 and pe... A self-employed resident citizen taxpayer, who is married, has gross profit from sales of goods of P1,200,000, operating expenses of P400,000, cost of goods sold of P500,000 and personal expenses amounting to P30,000. If the taxpayer chooses to be taxed using the graduated rates, his income tax will be:
Understand the Problem
The question is asking us to calculate the income tax of a self-employed individual using the graduated tax rates in the Philippines. We will need to calculate the taxable income by subtracting the cost of goods sold and operating expenses from the gross profit, and then determine the income tax based on the graduated tax table. Personal expenses are not deductible for income tax purposes.
Answer
₱40,000
Answer for screen readers
₱40,000
Steps to Solve
- Calculate the Gross Profit
Gross profit is calculated by subtracting the Cost of Goods Sold from Gross Sales/Receipts.
$$ \text{Gross Profit} = \text{Gross Sales/Receipts} - \text{Cost of Goods Sold} $$
$$ \text{Gross Profit} = ₱800,000 - ₱200,000 = ₱600,000 $$
- Calculate the Taxable Income
Taxable income is calculated by subtracting Operating Expenses from the Gross Profit. Personal expenses are not deductible.
$$ \text{Taxable Income} = \text{Gross Profit} - \text{Operating Expenses} $$
$$ \text{Taxable Income} = ₱600,000 - ₱150,000 = ₱450,000 $$
- Calculate the Income Tax
Based on the provided graduated income tax rates for self-employed individuals and professionals in the Philippines, we will calculate the income tax for a taxable income of $₱450,000$. Looking at the tax table, $₱450,000$ falls within the range of "Over $₱400,000$ but not over $₱800,000$". The tax due is $₱30,000$ plus 20% of the excess over $₱400,000$.
$$ \text{Income Tax} = ₱30,000 + (0.20 \times (\text{Taxable Income} - ₱400,000)) $$
$$ \text{Income Tax} = ₱30,000 + (0.20 \times (₱450,000 - ₱400,000)) $$
$$ \text{Income Tax} = ₱30,000 + (0.20 \times ₱50,000) $$
$$ \text{Income Tax} = ₱30,000 + ₱10,000 $$
$$ \text{Income Tax} = ₱40,000 $$
₱40,000
More Information
The income tax for a self-employed individual in the Philippines with a taxable income of $₱450,000$ is $₱40,000$ based on the 2023 graduated income tax rates.
Tips
A common mistake is to include personal expenses as deductible items when calculating taxable income. Only business-related operating expenses are deductible. Another mistake is misinterpreting the graduated tax table and applying the incorrect tax rate or base amount. Always double-check which income bracket the taxable income falls into.
AI-generated content may contain errors. Please verify critical information
