Senate lifts tax exemption limits on dependents

The Senate today approved on third and final reading a bill seeking to lift the limit on the number of qualified dependents that a taxpayer may claim on tax deduction.

Sen. Ralph Recto, author and sponsor of Senate Bill No. 2855, otherwise known as the Family Care Act of 2013, said the proposed legislation seeks to amend Section 35, paragraph B of the National Internal Revenue Code of 1997, which limits the number of dependents to only four at P25,000 per person.

While the cap on the number of dependents was established in 1973 to promote family planning, he said, the tax code discriminates large families.

He cited a study conducted by the Commission on Population which showed that "only women in the lowest and second lowest wealth quartile have four or more children." These groups, he added, are not even income payers.

"The committee's rational for removing the limitation on the number of qualified dependents for the tax purpose is that we believe, and we find support from economists, that setting a limitation on the number of dependents has no bearing on the decision of couples to beget children," Recto said during his sponsorship speech.

The Recto bill proposes to include as dependents legitimated children who are "born outside of wedlock of parents and under certain conditions, may be legitimated."

At the same time, the measure proposes to expand the coverage of qualified dependents to include parents or both parents who are dependent on the taxpayer for support and are living with him or her. The coverage, Recto explained, also includes a parent or parents, regardless of income, who are incapable of self-support because of mental or physical disability.

"We also propose to allow a taxpayer who acts as legal guardian of a person with mental or physical handicap, regardless of age and incapable of self-support, to claim the additional exemption for the said dependents," Recto said.

"The impact of the bill is on the economic reprieve that will be granted to families, alleviating the financial difficulties of taxpayers with more children, and allowing individuals to cope with the cost of caring for parents and legitimated children or children with disabilities," he added.

Other authors of the bill include Senators Antonio Trillanes IV, Manny Villar and Lito Lapid. (PILAR S. MACROHON/PRIB)