Got this from Moneysense.Com. These are great [and legal :-)] tips on how to get the best out of our hard-earned income.

If you are a full-time employee earning pure compensation income, then your biggest and first expense is taxes. You pay for your expenses with after-tax money. This is the earn-tax-spend process that puts you at a disadvantage. You bear most of the burden of income taxes in the country, since the tax is withheld from your income by your employer. Nevertheless, there are tax strategies you can use to ease the pain.

Tip #1: Earn non-taxable benefits
There’s little leverage if you’re a regular employee working in a vast organization. But if you’re a hot-shot recruit or you work in a small company, you can negotiate your total compensation package such that you get more of tax-exempt benefits such as retirement plans; health, accident, and life insurance; and the like. Sec. 32 (B) of the Tax Code enumerates the exclusions from gross income. Sure, you won’t exactly enjoy them now, but at least the more important things are covered, at least in part, paid by your employer.

Or if your company offers a “cafeteria plan”, which gives employees choices on what benefits to receive, go for the non-taxable benefits. Maybe if you’re young and have no plans on staying long at your company, you can go for the gym membership or the free movie tickets, but if you’re older, with a family, and thinking more long-term, well, you know your priorities.

Tip #2: Make the most of your retirement or profit-sharing plan
It may no longer be the age of company loyalty, but there are tax advantages to sticking it out with your employer. The Labor Code requires a minimum retirement plan for private companies, allowing you to retire with tax-free benefits if you’re between 60 and 65 years old and have served at least five years in the company. For companies that have their own retirement plan, Sec. 32 (B) of the Tax Code has this condition for exclusion of retirement benefits: you have to be at least 50 years old and have been in service with your company for at least 10 years to enjoy tax-free retirement benefits. If your company has a defined-contribution, rather than defined-benefit, plan, or a profit-sharing scheme, contribute the maximum you’re allowed.

Tip #3: Postpone your bonus
Lowering your tax can be as simple as asking that your year-end taxable bonus or commission be given on January the following year, which is a particularly useful strategy if your income is mostly variable. If you have a steady fixed income and you’re already in the top tax bracket, it wouldn’t matter. Say you’re expecting to earn P500,000 for this year, much of it variable compensation like commissions and bonuses, which puts you in the 30% bracket. But then, you closed a sale just before the year ends that will earn you P100,000 in commissions. Now, you jump to the highest 32% tax bracket. Your tax bill, ignoring personal exemptions, is P157,000. However, if you think you won’t be earning as much the following year, ask your company accountant to delay the payment of your commission a few more days till January. Your tax due will go down to P125,000, saving you P32,000 in taxes.

Tip #4: Receive small amounts of fringe benefits
If you’re a rank-and-file employee, fringe benefits such as allowances are excluded from taxable income up to P30,000. More than that and they’ll be included in your compensation income subject to withholding tax. If you’re a supervisor or manager, as a general rule, your fringe benefits are subject to a final tax of 32%, thanks (or no thanks) to the special treatment of fringe benefits under Sec. 33 of the Tax Code. They are not part of your gross compensation income.

Now, there are some fringe benefits that are definitely exempt under Sec. 33 (C) and others that could be exempt under certain conditions. One such exemption is what is called de minimis benefits—small amounts in cash or in kind offered by your employer to promote health, goodwill, contentment, or efficiency. These include unused leave credits (up to 10 days), medical cash allowance (P125 per month), rice subsidy (P350 per month), clothing allowance (P3,000 per year), meal allowance (below 25% of the daily minimum wage), medical benefits (P10,000 per year), laundry allowance (P150 per month), achievement awards (annual value below 50% of basic monthly salary), gifts on special occasions (like flowers, fruits, and books for birthdays and weddings), and cash gifts during Christmas and anniversary celebrations (up to P5,000). Ask your company to max those out. But it should follow the limits imposed by the BIR, because anything in excess will be taxed.

Tip #5: Earn for the convenience of your employer
There are certain benefits, otherwise subject to fringe benefits tax, which can be exempt if they fall under the so-called “convenience of the employer” rule of Sec. 33 of the Tax Code: “unless the fringe benefit is required by the nature of, or necessary to the trade, business or profession of the employer, or when the fringe benefit is for the convenience or advantage of the employer.”

Reimbursable expenses, like taxi fares and representation for client calls, are for the convenience of the employer. If you get free dinners because you’re required to work the night shift, that’s for the convenience of your employer. If you receive a performance bonus in an effort by the company to retain you and achieve its annual targets, that may be considered for the convenience of the employer, and hence, not subject to fringe benefits tax (BIR DA Ruling No. 252-2006). It will also not form part of your taxable compensation income if all the bonuses you receive are within the P30,000 limit.

Even educational assistance for you or your dependents (BIR Ruling No. 041-2002), your house or condo unit (BIR Ruling No. 055-99 and BIR Ruling No. DA-170-2004), and 50% of the value of a personal computer (BIR Ruling No. 074-2000) paid for by your employer can be exempted, if they can be proven to be for the convenience of your employer.

Now, if your company really, really wants you, it may even give you taxable fringe benefits such as housing, an expense account, a car, household personnel, club memberships, foreign travel expenses, vacation expenses, and educational assistance. Sure, they’re definitely subject to the 32% fringe benefits tax, but you can have your employer pay for it, not you. Anyway, your company can deduct the grossed-up value (which includes the tax paid) of the fringe benefits from its own gross income.

Tip #6: Adjust your withholding
Ask your employer to adjust the amount of taxes it withholds, for instance if you change your status from single to head of family or married, or if you add more dependents (thus allowing additional personal exemptions). If you donate to charity, inform your payroll department. Instead of waiting till year-end to claim these deductions and earn a tax refund or tax credit, have them adjust your withholding tax immediately so you can have a higher take-home pay.

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