Tax Reviewer
DEDUCTIONS FROM GROSS ESTATE (TRAIN Law - RR 12-2018)
1. Ordinary Deductions
Type Requisites Computation / Notes
Losses (Casualty) - Acts of God/man Value of loss = FMV before - FMV
- Not insured after calamity
- Not claimed in income
tax
- Incurred within 1 year
from death
Indebtedness - Valid, enforceable debt Full amount of unpaid debt (if
- Incurred in good faith substantiated)
- Not prescribed
- Duly notarized loan
docs
Unpaid Mortgages - Property included in Deduct unpaid mortgage amount
gross estate
- Contracted in good
faith
Taxes - Accrued before death E.g., unpaid income tax from
only Jan-March before death
Claims vs. Insolvent - Insolvency must be Deduction = Uncollectible portion
Persons proven
- Included first in gross
estate
Not Deductible: Funeral, medical, and judicial expenses (TRAIN Law)
2. Special Deductions
Type Rule / Requirement Computation / Limits
Standard No substantiation required ₱5M (resident citizen) or
Deduction ₱500K (nonresident alien)
Family Home Must be actual residence Lower of FMV or ₱10M
Certified by Brgy. Captain
Included in gross estate
RA 4917 Amount received from employer upon Full amount (no limit)
Benefits death; included in gross estate
Transfer for Property transferred to government or Full value if included in gross
Public Use PRC estate
Vanishing Property received as gift/inheritance Depends on holding period
Deduction Tax already paid (see below)
Within 5 yrs
Vanishing Deduction Rates:
Years Before Rate
Death
< 1 year 100%
1-2 years 80%
2-3 years 60%
3-4 years 40%
4-5 years 20%
> 5 years Not
allowed
3. Net Share of Surviving Spouse
● Applies if conjugal/community property
● Computation:
Inclusion/Exclusion from Deductions
Item Example Include as Reason
Deduction?
Unpaid mortgage before death Yes Ordinary deduction
Funeral expense after death No Not allowed under TRAIN
Law
Claim vs. insolvent with proof Yes Insolvency substantiated
Medical bills after death No Not deductible anymore
Donation to Quezon City Yes Transfer for public purpose
(Gov't)
Property Relations Classification (ACoP, CPG, Exclusive)
Property Type
Land inherited by husband Exclusive (by gratuitous title)
Car bought during marriage Community/Conjugal
(CPG/ACoP)
Jewelry gifted to wife Community (jewelry is
exception)
Property acquired before marriage by spouse with legit Exclusive
child
Livestock raised during marriage Community/Conjugal
If no prenup:
● Married before Aug 3, 1988 → CPG
● Married on/after Aug 3, 1988 → ACoP
Estate Tax Computation Formula:
Estate Tax Credit (for international double taxation)
Only for resident citizens:
Use lower of:
1. Actual tax paid abroad
2. Credit limit (per country or aggregate)
Nonresident aliens are not entitled to estate tax credit.
Sample Computation:
Scenario:
Resident citizen died in 2021.
● Net Estate in PH: ₱8,000,000
● Net Estate in USA: ₱2,000,000
● Estate tax paid in USA: ₱400,000
Solution:
● Total Net Estate = ₱10M
● Estate Tax Due = ₱10M × 6% = ₱600K
● Credit limit = (2M/10M) × 600K = ₱120K
● Allowed credit = ₱120K (lower of 120K and 400K)
● Estate Tax Payable = 600K – 120K = ₱480K
