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Optional Standard Deductions in the Philippines

Optional Standard Deduction or what is commonly known as OSD is a type of deduction that a taxpayer may opt to use instead of itemizing its expenses. A taxpayer may elect a standard deduction in an amount not exceeding forty percent (40%) of its gross income as defined in Section 32 of the Tax Code. This would mean that only sixty percent (60%) of gross sales and receipts will be taxable.

The taxpayer needs to imply his intention to use the optional standard deduction when submitting his return, if he failed to do so, the taxpayer shall be considered as having availed himself the itemized deductions. Once the optional standard deduction is chosen it is irrevocable for the taxable year for which the return is made. The taxpayer can change from optional standard deduction to itemized deductions in the next taxable year on the first quarterly filing of income tax.

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