13th month pay: who gets it and the P90,000 tax rule

Your 13th month pay is a legal right due by December 24, and it is tax-free up to a combined P90,000. Here is who is covered and what gets taxed.

December payday feels different. There is the 13th month pay, maybe a Christmas bonus, and the quiet math of what actually lands in your account. Here is what the law promises, who is covered, and the one number that decides whether the BIR takes a cut.

Who is entitled

The 13th month pay comes from Presidential Decree No. 851, signed in 1975. Every rank-and-file employee in the private sector is covered, whatever their job title and whether they are regular, probationary, casual, seasonal, or project-based. You qualify as long as you worked at least one month during the calendar year. The original decree only reached those earning P1,000 a month or less, but that salary ceiling was removed in 1986, so today the size of your pay does not matter.

Two groups sit outside the rule. Managerial employees are not legally entitled, though plenty of companies still give them a bonus. And government workers fall under their own separate rules, not PD 851.

How much, and by when

Your 13th month pay is one twelfth (1/12) of the basic salary you earned during the year. Basic salary means your regular pay. It leaves out overtime, holiday premiums, night differential, and allowances that were never folded into your base rate. So if you were on leave without pay for a stretch, or you started in the middle of the year, your 13th month is prorated. It is a share of what you actually earned, not a flat extra month for everyone.

The deadline is firm: on or before December 24 every year. An employer may split it, half before the school year opens and half by December 24, but the full amount has to be in your hands by Christmas Eve.

The P90,000 line

Here is the part everyone asks about. Is the 13th month pay taxed?

Under the TRAIN law (Republic Act No. 10963), your 13th month pay and other benefits are tax-free up to a combined P90,000 for the year. "Other benefits" is the phrase to watch. The P90,000 is not a separate allowance just for your 13th month. It is one shared ceiling that also covers your Christmas bonus, productivity incentives, and similar cash benefits.

Add them all up. Whatever fits under P90,000 is exempt. Only the amount above P90,000 is added to your taxable income and taxed at your usual rate.

A quick example. Say your 13th month pay is P60,000 and your company also hands out a P50,000 Christmas bonus. Together that is P110,000. The first P90,000 is tax-free; the remaining P20,000 is taxable. Had your combined benefits stayed at or below P90,000, none of it would be taxed at all.

Two things worth keeping straight. The P90,000 is an annual ceiling, not a monthly one, and it is separate from the P250,000 of yearly income that TRAIN already exempts across the board. And de minimis benefits, small perks like rice or uniform allowance within the BIR limits, sit outside this P90,000 count entirely.

What to do

- Check your payslip: confirm the 13th month is 1/12 of the basic salary you earned this year, not a flat figure someone guessed at. - Add up your year-end benefits (13th month, bonus, incentives) to see whether the total crosses P90,000. - If you changed jobs this year, keep the BIR Form 2316 from your old employer so the new one can compute your tax correctly. - If you were not paid by December 24, or were paid less than 1/12, raise it with your employer or file a money claim with the DOLE.

13th month pay: who gets it and the P90,000 tax rule

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