Understanding BIR Tax‑Status Codes H1, H2 and ME1
A Philippine Legal Commentary

1. What “tax‑status codes” are and why they exist

For payroll purposes the Bureau of Internal Revenue (BIR) long required employers to tag each employee with a tax‑status code.
Letter + number indicate the civil status of the employee and the count of qualified dependents being claimed for additional exemptions:

Letter	Civil status / claimant	Typical pre‑TRAIN personal exemption
Z	No personal & no additional exemptions (“zero‑exemption”)	₱0
S	Single (not head of family)	₱50 000
H	Head of the Family	₱50 000
ME	Married Employee who, not the spouse, is claiming the exemptions for the family	₱50 000

The number (0‑4) that follows the letter shows how many qualified dependent children (maximum four) the employee claims. Thus:

H1 = Head of family + 1 qualified dependent
H2 = Head of family + 2 qualified dependents
ME1 = Married employee (claimant) + 1 qualified dependent

If a number is absent the code implies “0” (e.g., H alone or S alone).

Qualified dependent child (old §35(B), NIRC): legitimate, legitimated, acknowledged natural, or legally adopted child, below 21 years, living with and chiefly dependent on the taxpayer for support — or of any age if physically or mentally incapacitated.

2. Statutory and regulatory foundations (pre‑TRAIN)

Instrument	Key provisions affecting H/ME codes
§35, §79 & §83, National Internal Revenue Code (NIRC) (as amended by R.A. 9504)	Fixed the ₱50 000 personal exemption and ₱25 000 per dependent (max 4).
Revenue Regulations (RR) 2‑98 & subsequent amendments	Prescribed the alphabetic‑numeric codes for payroll withholding and the Withholding Tax Tables, columns S, H & ME.
RR 10‑2008 / RR 5‑2011	Brought the codes into the electronic Alphalist Data Entry & Validation Module (DAT files), BIR Form 2316, Form 1604‑C, etc.

Employers were obliged to secure BIR Form 1902 from new hires, check supporting documents (marriage contract, birth/adoption certificates), assign the proper code, and then withhold using the table column that matched the code. Misclassifying an employee understated or overstated withholding and exposed both employer and employee to deficiency tax, surcharges (up to 50 %), and interest (§248, NIRC).

3. Detailed decoding of the featured codes

3.1 Head of the Family (H series)

A head of the family is unmarried but maintains either (a) a household for legitimate dependents or (b) parental authority over dependent children.
Documentary proof: barangay certification of household composition plus birth certificates of dependents.

H1 – one qualified dependent
H2 – two qualified dependents
H3 / H4 – three or four dependents respectively

The exemption prior to 2018 equaled ₱50 000 + ₱25 000 × n, where n is the code number.

3.2 Married Employee (ME series)

ME means the employee (not the spouse) is the one claiming the couple’s personal exemption and the additional exemptions for the children.

Documentary proof: marriage certificate, spouse waiver (if spouse has income but opts not to claim), and children’s birth certificates.

ME1 – married employee + one qualified dependent
Ex‑TRAIN exemption: ₱50 000 + ₱25 000

The spouse who does not claim uses code Z (zero exemption) for withholding; at year‑end the spouses may still file a joint return to optimize tax outcome.

4. TRAIN Law (R.A. 10963) and the “death” of tax‑status codes

Effective 1 January 2018 the TRAIN Law repealed §35 and eliminated personal and additional exemptions entirely. Consequences:

Withholding tax tables were rebuilt (RR 8‑2018, RR 11‑2018). Columns S, H, ME disappeared; withholding is now based solely on the semi‑monthly/weekly bracketed rates.
Codes are no longer needed for tax computation. Employers, however, may continue to capture civil‑status information for HR purposes or for BIR Form 2316 (the 2018 version still displays a field but it is informational only).
In Alphalist DAT files, the accepted codes are now limited to
- “S” (single/any civil status) and
- “Z” (no longer used in practice)
  or left blank, because exemptions no longer affect the tax.

Practical tip: Audit teams occasionally flag legacy payroll systems that still adjust withholding by H/ME codes. Doing so after 2017 will systematically under‑withhold.

5. Ongoing relevance of H1, H2, ME1 despite TRAIN

Historical audits. BIR can assess payroll years still open under the three‑year prescriptive period (§203, NIRC). If 2017 or earlier is under audit, the examiner will verify whether the employee’s code and matching exemption amount were correct.
Fringe‑benefit rationalization. Some collective bargaining agreements still reference “H2 employee” in describing allowances; HR should realign these clauses.
Software conversion & data migration. When upgrading payroll systems, legacy H/ME fields should be archived but excluded from live withholding formulas.

6. Compliance guide for employers (current rules)

Do keep civil‑status documentation in 2018‑present records—BIR still asks for them during compliance visits to cross‑check substituted filing claims on Form 2316.
Do not use H/ME codes to lower withholding after 2017. The correct basis is RR 8‑2018’s progressive table or RR 13‑2023’s weekly/semi‑monthly tables.
Report codes only when the scheme explicitly requests them (e.g., old‑year amended 2316). Otherwise leave the field blank or supply “S”.
Penalties for non‑compliance: failure to withhold / remit under §251 and §255 may incur a 25 % surcharge plus 12 % annual interest on the deficiency.

7. Frequently‑asked questions

Question	Short answer
Can I still claim H2 on my 2024 salary?	No. Personal and additional exemptions were abolished from 2018 onward.
Does ME1 reduce my income tax when I file BIR Form 1700?	If the year is 2017 or earlier, yes; if 2018‑present, no effect.
How many dependents may I claim?	Up to four, provided they meet the qualified‑child test (pre‑TRAIN). After TRAIN, the count is academic for income‑tax purposes.
What if both spouses accidentally claimed ME1 in 2016?	File an amended return, pay deficiency tax plus penalties; employer may likewise be assessed for short‑withholding.
Will the government restore personal exemptions?	There is no active bill to reinstate them as of April 2025.

8. Key take‑aways

H1, H2, ME1 are historical constructs that mattered for payroll withholding until 31 Dec 2017.
The TRAIN Law’s overhaul removed the tax benefit but the codes still surface in old audits, systems, and HR policies.
Employers must guard against legacy formulas that still reference these codes; employees should understand that, post‑TRAIN, civil status no longer affects the amount of income tax withheld.

This article is a general legal commentary prepared as of 21 April 2025 for Philippine‑law purposes. It is not a substitute for individualized advice. For complex situations consult a BIR‐accredited tax professional.