Q&A: Is the Medical Allowance of Government Employees taxable?
Question
Is the Medical Allowance of government employees amounting to ₱7,000.00 taxable?
Answer
No, the government employees’ medical allowance of ₱7,000.00 per year is not taxable as it is considered a de minimis benefit exempt from income and withholding tax.
However, any amount received above ₱7,000.00 will be considered part of “other benefits” and may be subject to income tax if it exceeds the P90,000.00 annual tax-exempt threshold for “other benefits”.
Pursuant to Revenue Memorandum Circular No. 107-2024, as provided in Budget Circular No. 2024-6, the authorized Medical Allowance falls under “de minimis benefits” contemplated in Section 2.78.1(A)3) of Revenue Regulation No. 2-98, as amended.
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Such being the case, the Medical Allowance and/or the actual premium paid to the Health Maintenance Organization (HMO) providers in compliance with Executive Order No. 64, s. 2024 is exempt from income tax and consequently to withholding tax.
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How to avail this medical allowance
To avail of the Medical Allowance, first, your agency or LGU must have an approved budget. Secondly, the employee must have rendered the required government service which is at least six months; thirdly, comply the conditions set forth in the guidelines.