Philadelphia Landlord Taxes: BIRT, Net Profits Tax and the Commercial Activity License
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By Max Karasick, Compass real estate agent licensed in PA and NJ
If you rent out a Philadelphia property you don't live in, the City sees a business. That usually means three things: a Commercial Activity License, a Business Income and Receipts Tax (BIRT) return and, unless you own it through a corporation, a Net Profits Tax (NPT) return. The old $100,000 BIRT exemption disappeared starting with tax year 2025, so even a single rental unit now means a return. Both returns for 2026 rental activity are due April 15, 2027.
This guide covers the taxes on rental income. For the Rental License and lead rules, see Max's Philadelphia rental license guide.
Do Philadelphia Landlords Pay BIRT?
Yes. The Department of Revenue puts commercial or residential real estate rental activity on its list of businesses that have to file BIRT. Since tax year 2025 there's no $100,000 exemption, so a landlord with one rental unit now files a BIRT return and usually owes something.
BIRT comes in two parts, and you pay both. There's a tiny rate on all the rent you collect and a much bigger rate on what's left after expenses. As of October 2026, the City's Tax Rate History lists:
Tax year 2026: 1.395 mills ($1.395 per $1,000 of rent) on gross receipts and 5.65% on taxable net income
Tax year 2027: 1.390 mills on gross receipts and 5.60% on taxable net income
What Happened to the $100,000 Exemption
Through tax year 2024, the first $100,000 of gross receipts and a proportionate share of net income were exempt, so plenty of small landlords never filed. The City's notice to business owners says the exemption was removed after a legal challenge, effective for tax year 2025. The $100,000 figure still on the BIRT page is a nexus test for businesses located outside the city, not the old exemption.
What Is the Net Profits Tax?
The Net Profits Tax is the City's tax on the net profit of unincorporated businesses: sole proprietors, partnerships, LLCs taxed as partnerships or disregarded entities, estates and trusts. And the City says renting property is, in most cases, a business. You owe a return even in a year you lost money. Corporations aren't subject to NPT.
Residents vs Non-Residents
Where you live changes what's taxed and the rate. Per the City's 2025 instructions, a Philadelphia resident running a business owes NPT no matter where the activity happens, while a non-resident owes it on business in Philadelphia. As of October 2026, the Tax Rate History lists 3.735% for residents and 3.425% for non-residents for tax year 2026, then 3.73% and 3.42% for 2027.
The 60 Percent Credit
BIRT and NPT both bite the same profit. The City's notice to business owners describes a 60 percent NPT credit based on the net income portion of BIRT, applied automatically on returns filed through the Philadelphia Tax Center. The credit shrinks your NPT bill, not your BIRT bill.
LLCs and the School Income Tax
The City follows however the IRS treats your LLC. An LLC taxed as a partnership or a disregarded entity owes NPT. One that elects corporate treatment doesn't, though it still files BIRT. A new federal ID number means a new tax account and a new Commercial Activity License, worth knowing before you move a rental into an LLC.
Residents should also know the City lists "some rental income" as subject to the School Income Tax. Which return your rental belongs on is a CPA question.
How Wage Tax Fits With the Net Profits Tax
The Wage Tax and NPT hit different income. The City describes the Earnings Tax as a tax on salaries, wages, commissions and other compensation. The Wage Tax is that same tax when your employer withholds it. The City also says self-employed people pay BIRT and NPT instead of the Earnings Tax on their business income.
Salaried job plus a rental? That's two tracks: Wage Tax out of every paycheck, plus BIRT and NPT on the rental each April. The City's pages describe no credit between them, so your withholding does nothing for the rental's tax. As of October 2026, the Wage Tax rates effective July 1, 2026 (3.735% resident, 3.425% non-resident) match the 2026 NPT rates.
Do Landlords Need a Commercial Activity License?
Yes, in most cases. The City says any person or legal entity doing business in Philadelphia needs a Commercial Activity License. Its landlord pages add that an owner renting a property they don't live in, or a building with four or more rental units, needs one along with a BIRT account. The license is free and never needs renewal.
Live in the building and rent out three or fewer units? You use an Activity License Number instead. Applying through eCLIPSE takes a BIRT ID, a Social Security Number or EIN and current City taxes, and the legal name has to match the tax account exactly. Not close. Exact. The CAL comes before the Rental License.
Here's the catch: a CAL keeps the filing obligation alive. The BIRT page says license holders who aren't operating still file, and the 2025 instructions say to close the accounts with a change form once the activity stops. Sell your last rental and skip that form, and you risk non-filer penalties for a business you no longer have.
When Are BIRT and NPT Due for the 2026 Tax Year?
April 15, 2027, for both. The Department of Revenue states that date for 2026 BIRT returns, and NPT returns are due April 15 for the prior year. There's an automatic extension of up to 60 days, but it covers filing, not paying. Any tax you owe is still due April 15.
Estimated Payments Are the Surprise
Year two stings. BIRT generally requires an estimated payment toward next year equal to 100% of the current year's tax, paid with the return. First filed in 2026? You skipped that estimate. On your second return, due April 15, 2027, you owe the 2026 tax plus a 2027 estimate. You can pay it in full or in four installments: April 15, June 15 and September 15 of 2027 plus January 15, 2028.
For NPT, the City's page says current year estimates come in two payments, on April 15 and June 15. Each one has to equal 25% of the prior year's NPT.
Pay late and the 2025 instructions add interest at the federal short-term rate plus five points and a penalty of 1.25% per month. These dates reflect City guidance as of October 2026, so confirm them before you file.
Worked Example: A Hypothetical Duplex
Picture a Philadelphia resident with one city duplex in their own name, doesn't live there and has no business outside Philadelphia. The numbers are round on purpose.
Rent collected in 2026: $36,000
Deductible expenses (mortgage interest, repairs, insurance, Real Estate Tax and depreciation): $24,000
Net income: $12,000
At 2026 rates:
BIRT gross receipts: $36,000 x 1.395 mills = $50.22
BIRT net income: $12,000 x 5.65% = $678.00
Total BIRT: $728.22
NPT before credit: $12,000 x 3.735% = $448.20
Credit: 60% of $678.00 = $406.80
NPT after credit: $41.40
Total City tax on the rental: $769.62
Move that owner outside Philadelphia and NPT before the credit drops to $12,000 x 3.425% = $411.00. The credit stays at $406.80, so NPT after credit is $4.20 and the total comes to $732.42.
The BIRT net income piece does most of the work. Depreciation choices on your federal return, including the strategies in Max's cost segregation guide, change that net income figure, so ask your CPA how the City treats them. And if this owner first filed in 2026, the April 2027 payment also carries a 2027 BIRT estimate equal to the 2026 BIRT, $728.22, payable in full or in quarters. Apportionment and other credits can move real figures.
How Max Uses This With Clients
Max puts the City tax line into the numbers before an investor ever makes an offer. When he runs a rental with a client through his investment process, the projection carries a BIRT and NPT line at current published rates, next to Real Estate Tax. No surprises in April.
Before closing, he walks the buyer through the setup order: tax account, Commercial Activity License, then Rental License. He flags early whether the property will sit in the client's name or an LLC, since that changes the license and NPT picture. Then he sends the client to their CPA with written questions: which entity should own it, whether any of the income belongs on the School Income Tax return and how estimated payments will work in the first two years. Max doesn't prepare returns or give tax advice. The CPA owns those answers. Already renting? Start at Max's landlord page.
This article is general information as of October 2026, not tax or legal advice. Before filing a return or forming an entity, confirm the numbers with a CPA or tax attorney who prepares Philadelphia business returns.
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FAQ
Do Philadelphia landlords pay BIRT?
Yes. If you rent out Philadelphia property you don't live in, you generally file the Business Income and Receipts Tax every year. Since tax year 2025 the City no longer offers the $100,000 BIRT exemption, so even one rental unit means a return. The 2026 rates are 1.395 mills on gross receipts and 5.65% on net income.
Do landlords need a Commercial Activity License?
Yes, in most cases. Philadelphia requires one for an owner renting a property they don't live in or a building with four or more rental units. The license is free, never needs renewal and requires a BIRT account. Live in the building and rent three or fewer units? You use an Activity License Number instead.
What is the Net Profits Tax?
The Net Profits Tax is Philadelphia's tax on the net profit of unincorporated businesses, which includes most individually owned rentals. For tax year 2026 the City lists 3.735% for residents and 3.425% for non-residents. A credit worth 60 percent of the BIRT net income portion takes a real chunk out of the NPT you owe.
When is the BIRT due date for 2026 rental income?
April 15, 2027. The Net Profits Tax return is due the same day. The City grants an automatic extension of up to 60 days to file, but not to pay. If it's your second BIRT return, you can pay the 2027 estimate in full or in four quarterly installments.
