Changes to Philly BIRT/NPT Rules
For the past 10 years, the first $100,000 of gross income was exempted from the BIRT (Business Income and Receipts Tax). For many of our clients, we filed a BIRT-NTL (No Tax Liability) form.
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The City has removed the $100,000 exemption beginning with tax year 2025.
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Now, everyone in Philadelphia with self-employed income will have to report their gross business receipts on either a BIRT-EZ form or a long-form BIRT - which calculates "apportionment factors" if a substantial portion of your gross income was earned outside Philly - and pay the tax.
Tax calculations and comparison scenarios
Tax Calculation formulas:
BIRT tax liability = (0.001415 x gross receipts) + (0.0599 x net profit)
NPT tax liability = (0.0375 x net profit) - (0.6 x BIRT liability on net profit)
Artist A
Artist A has $40,000 in gross income and $20,000 in net income on Schedule C
Previous Years
Artist A would have filed a BIRT-NTL or BIRT-EZ and owed nothing for BIRT as they were under the $100,000 exemption threshold.
Artist A would have filed NPT and owed 3.75% ($750)
Total Philadelphia taxes owed: $750
Beginning in Tax Year 2025
Artist A will file BIRT-EZ and owe $57 on their gross income and $1,198 on their net profit, totaling $1,255 for the BIRT.
Artist A will also file the NPT, and owe 3.75% of $20,000 ($750) minus a credit of 60% of the net income portion of the BIRT ($719), totaling $31 for the NPT.
Total Philadelphia taxes owed:
$1,286.
Artist B
Artist B has $120,000 in gross income and $80,000 in net income on Schedule C
Previous Years
Artist B would have filed a BIRT-EZ and had the first $100,000 exempted from the tax. The remaining $20,000 in gross income would result in owing $28 on their gross receipts and $1,548 on their net profits, totaling $1,576 for the BIRT.
Artist B would have filed NPT and owed 3/75% of $80,000 ($3,000) minus a credit of 60% of the net income portion of the BIRT ($929), totaling $2,071 for the NPT.
Total Philadelphia taxes owed: $3,647
Beginning in Tax Year 2025
Artist B will file BIRT-EZ and owe $170 on their gross income and $4,792 on their net profit, totaling $4,962 for the BIRT.
Artist B will also file the NPT, and owe 3.75% of $80,000 ($3,000) minus a credit of 60% of the net income portion of the BIRT ($2,875), totaling $125 for the NPT.
Total Philadelphia taxes owed:
$5,087.
Artist C
Artist C does not live in Philadelphia. They had $120,000 in gross income and $80,000 in net income on Schedule C, but earned half in Philly.
Previous Years
Artist C would have filed a BIRT long form and had an apportionment factor of 50%. This would have put them under the $100,000 threshold and they would have owed nothing for the BIRT.
Artist C would have filed NPT and owed 3.75% of $40,000, totaling $1500.
Total Philadelphia taxes owed: $1,500
Beginning in Tax Year 2025
Artist C will file the BIRT long form and calculate an apportionment factor of 50%. They will owe $85 on their gross income and $2,396 on their net profit, totaling $2,481 for the BIRT.
Artist C will also file the NPT, and owe 3.75% of $40,000 ($1,500) minus a credit of 60% of the net income portion of the BIRT ($1,438), totaling $62 for the NPT.
Total Philadelphia taxes owed:
$2,543.