Tax Exemption for Parents (or Guardians) of Disabled Children in the Philippines: A Comprehensive Overview

In the Philippines, persons with disabilities (PWDs) and their families receive various forms of support under different laws, most notably the Magna Carta for Persons with Disability (Republic Act No. 7277, as amended) and its subsequent amendments. One area of significant interest has been whether parents or guardians of children with disabilities can claim additional tax exemptions or deductions. Below is an in-depth discussion of the legal basis, historical background, current rules, and practical considerations surrounding this issue.

1. Relevant Laws and Regulations

Magna Carta for Persons with Disability (R.A. 7277, as amended by R.A. 9442 and R.A. 10754)
- Enshrines the rights and privileges of PWDs in the Philippines, including discounts on certain purchases (e.g., medicines, medical supplies, domestic travel, etc.).
- R.A. 10754 (approved in 2016) introduced additional benefits and privileges to PWDs and, crucially, contained a provision granting an additional tax exemption to parents or guardians of PWD dependents.
National Internal Revenue Code (NIRC), as amended
- The Philippine Tax Code governs the imposition of income taxes on individuals and corporations.
- Over the years, the Tax Code has allowed “personal exemptions” and “additional exemptions” (for dependents) under certain circumstances.
- TRAIN Law (R.A. 10963): Passed in 2017 and fully implemented in 2018, it reformed the Philippine tax system by removing personal and additional exemptions for individual taxpayers.
Bureau of Internal Revenue (BIR) Regulations and Issuances
- The BIR, the agency responsible for tax administration, issues regulations, circulars, and rulings to clarify or implement changes in the tax laws.
- Important: Because R.A. 10963 (TRAIN) removed personal and additional exemptions, there has been confusion on whether the additional (PHP 25,000) exemption under R.A. 10754 for each PWD dependent still applies.

2. Historical Context of Additional Tax Exemptions

2.1 Pre-TRAIN Law (Before 2018)

Personal Exemption
Under the old tax system, individual taxpayers were entitled to a personal exemption (typically (PHP 50,000) for a single taxpayer).
Additional Exemption for Dependents
Taxpayers could claim an additional exemption of (PHP 25,000) per dependent child (up to four dependents).
R.A. 10754 (Enacted 2016)
Introduced an additional deduction of (PHP 25,000) specifically for each PWD-dependent (on top of the existing additional exemption).
- A “PWD-dependent” was defined under the law as a child (whether minor or of legal age) who is incapable of self-support due to a disability, provided that the PWD is chiefly dependent on and living with the taxpayer.

2.2 Post-TRAIN Law (2018 Onwards)

Removal of Personal and Additional Exemptions
With the passage of the TRAIN law, all personal exemptions and additional exemptions for dependents were removed.
- The rationale was to simplify the tax system and replace these exemptions with lower tax rates and a broader tax base.
Conflict Between R.A. 10754 and R.A. 10963
- R.A. 10754 explicitly provided for an additional tax exemption for parents/guardians of PWD dependents.
- R.A. 10963 removed all personal and additional exemptions for individual taxpayers—without explicitly mentioning the fate of the PWD exemption.

In practice, the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) have taken the position that the TRAIN law’s repeal of personal/additional exemptions supersedes the PWD exemption provided by R.A. 10754. Thus, any specific additional tax deduction for parents of PWD children is considered effectively no longer applicable under the current tax regime.

3. Current Standing: Is There Still a Tax Exemption for Parents of Disabled Children?

3.1 Official Interpretation

The BIR has not issued any regulation or memorandum circular reintroducing or affirming an additional exemption specifically for PWD dependents after TRAIN came into effect.
In fact, the general stance has been that the TRAIN law’s broad removal of personal and additional exemptions covers all categories of dependents—including those with disabilities.

3.2 Legislative Proposals

Various bills and proposals have been introduced seeking to restore or clarify the additional exemptions for parents/guardians of PWD dependents. However, as of this writing, no new law has been passed that effectively revives the R.A. 10754 tax exemption provision in light of TRAIN.

3.3 Practical Implication for Taxpayers

No Additional Tax Deduction: Parents or guardians of children with disabilities do not presently enjoy an additional exemption or deduction from gross income specifically on account of their child’s disability.
Other PWD-Related Benefits Remain: Even though the tax exemption is no longer in effect, other benefits under R.A. 7277, R.A. 9442, and R.A. 10754 remain in force for the person with disability (e.g., 20% discount and VAT exemption for certain purchases, priority lanes, educational assistance, medical privileges, and more).

4. Other Forms of Assistance and Related Considerations

Even without a specific income tax exemption for the parent, there are still important benefits that help reduce the financial burden on families with PWDs:

Discounts and VAT Exemptions for PWD Purchases
- PWDs are entitled to a 20% discount and VAT exemption on the purchase of certain goods and services, such as medicines, medical equipment, domestic transportation fares, restaurants, recreation centers, and similar items/services.
- Parents or guardians can avail of these discounts on behalf of their PWD child, provided the purchase is exclusively for the child’s use or enjoyment.
Educational Assistance
- PWDs are often entitled to educational benefits such as scholarship programs, subsidies, or other forms of assistance from local governments or NGOs, reducing the family’s financial burden.
Healthcare and Rehabilitation Support
- Government facilities provide free or subsidized medical and dental services, assistive devices, and rehabilitation programs for PWDs.
- PhilHealth also has special packages for certain disabilities and conditions.
Local Government Unit (LGU) Benefits
- Some cities or municipalities offer additional local tax discounts, employment assistance, or livelihood programs for families with PWDs.
- These may come in the form of reduced real property taxes, business taxes, or other localized benefits depending on the LGU.
Employment Incentives for Hiring PWDs
- Employers who hire persons with disabilities may receive incentives, which can indirectly benefit families if they have employable PWD members.
- However, this is separate from the individual income tax exemption issue.

5. Frequently Asked Questions (FAQs)

Does R.A. 10754’s additional (PHP 25,000) exemption for PWD dependents still apply?
- Short Answer: In practice, no. Because the TRAIN law removed all personal and additional exemptions, the BIR has effectively considered the R.A. 10754 provision overridden. No implementing rules under TRAIN have revalidated or preserved that specific exemption.
Can parents or guardians still claim the child as a dependent for tax purposes (even if not a PWD)?
- Under the TRAIN law, there is no longer an additional exemption for dependents, whether disabled or not. The system now uses revised tax brackets instead of personal/dependent exemptions.
Are there pending measures to bring back the PWD exemption?
- Yes, there have been legislative proposals aiming to restore or clarify an additional deduction specifically for PWD dependents. However, as of this writing, no final law has been passed.
What about other tax benefits for PWDs?
- The Magna Carta for Persons with Disability (as amended) continues to grant discounts and VAT exemptions on qualifying purchases. These are separate from income tax exemptions and remain fully in effect.
If I have past tax returns (before 2018) where I claimed the R.A. 10754 exemption, is that still valid?
- For taxable years before the implementation of TRAIN (i.e., 2016–2017), claiming the additional exemption for a qualified PWD dependent was valid under the old system, assuming compliance with BIR requirements at that time.

6. Summary and Key Takeaways

R.A. 10754 vs. TRAIN Law: While R.A. 10754 explicitly provided an additional (PHP 25,000) tax exemption for each PWD dependent, the subsequent passage of the TRAIN law (R.A. 10963) removed all personal and additional exemptions in the Philippine tax system.
Current Status: Under the existing tax regime, parents or guardians of PWD children no longer enjoy a specific additional tax exemption. The Department of Finance and the BIR interpret the TRAIN law as superseding or effectively repealing the relevant portion of R.A. 10754.
Other PWD Benefits: Families can still avail themselves of the discounts, VAT exemptions, and other privileges mandated by law for PWDs. The direct tax exemption for the parent/guardian, however, is not recognized under current rules.
Future Prospects: Legislative proposals may eventually restore or clarify an additional exemption for PWD dependents, but until such a law is passed, no additional personal exemption is available for parents or guardians of disabled children.

Disclaimer

This discussion is provided for general informational purposes and does not constitute legal advice. Tax laws and regulations are subject to change, and their interpretation can vary. For specific concerns or the latest official rulings, it is advisable to consult the Bureau of Internal Revenue (BIR), a licensed attorney, or a certified public accountant (CPA) specializing in Philippine taxation.