To promote better tax compliance among self-employed individuals, the government offered a new option under the TRAIN law: the 8% flat rate for income tax. This 8% rate option for self-employed taxpayers simplifies income tax computation and filing requirements. If you avail of this tax rate, you don’t deduct business expenses from your gross income to determine your taxable income. Instead, you multiply your annual gross sales or receipts by 8%. Also, you’re exempted from paying the 3% quarterly percentage tax under the 8% tax rate. While all these benefits are good reasons to choose the 8% tax rate over the graduated rates of 0% to 35%, it’s not ideal for everyone. The flat tax rate works best for freelancers, professionals, and other service-oriented jobs/businesses with minimal business expenses. Businesses and individuals with significant business expenses can minimize their tax dues with the graduated tax rates, which allow certain deductions from the gross income. To know which income tax rate option is optimal, do the math and compare the tax payable under the 8% tax rate vs. graduated rates. Whichever yields a lower tax due is the better option.