Philadelphia Net Profits Tax and BIRT for the self-employed, 2026
Philadelphia taxes a freelancer's profit twice, once as business income and once as earnings, with a credit linking the two.
Philadelphia Net Profits Tax (NPT), 2026
$3,362
Total with federal and Pennsylvania tax: $25,245
| Local rate applied to net profit | 3.735% |
| Self-employment tax | $12,717 |
| Federal income tax | $6,599 |
| Pennsylvania income tax | $2,568 |
Computed by Radif Partners from the Philadelphia finance department, read on October 15, 2026 · How we calculate
A self-employed Philadelphian owes two city taxes on the same business. The Net Profits Tax (NPT) takes 3.735% of net profit for residents in tax year 2026 (3.425% for nonresidents on business done in the city), with no minimum: a return is due even at a loss. The Business Income and Receipts Tax (BIRT) applies to every business operating in the city, sole proprietors and LLCs included, at 5.65% of taxable net income plus 1.395 mills on gross receipts, and since tax year 2025 the old $100,000 receipts exemption no longer applies. A credit equal to 60% of the BIRT net income portion is subtracted from the NPT, so the two do not add up in full. On $75,000 of profit and $120,000 of receipts, this page's simplified example comes to about $4,664 of city tax, on top of Pennsylvania's flat 3.07 %.
Most Pennsylvania freelancers pay a local earned income tax of about 1% to their municipality and school district. Philadelphia replaces it with its own, larger system. The Net Profits Tax is the earnings side: residents pay 3.735% on all their business net profits, even from business conducted outside the city, and nonresidents pay 3.425% on business conducted in Philadelphia (City of Philadelphia, 2026 rates). The calculator above applies the resident rate to the profit you enter.
Local tax on business profit
Philadelphia Net Profits Tax (NPT)
$2,988
| Rate | 3.735% |
BIRT, the business side
The Business Income and Receipts Tax is owed by every business doing business in the city, a one-person consultancy as much as a company. For tax year 2026 it has two parts: 5.65% of taxable net income and 1.395 mills, or $1.395 per $1,000, of gross receipts (Philadelphia tax rate history). Through tax year 2024, businesses with receipts of $100,000 or less were exempt; that exemption no longer applies from tax year 2025, after a legal challenge, so small freelancers now file and pay. The rates are scheduled to fall every year, down to no receipts portion and 2.80% of net income from 2038.
How the credit links the two taxes
Paying both taxes in full would tax the same profit twice. Philadelphia softens it with a credit against the NPT equal to 60% of the BIRT net income portion paid. A simplified example with $75,000 of profit and $120,000 of receipts, assuming BIRT taxable income equals the Schedule C profit:
- BIRT on net income: $4,237.50
- BIRT on gross receipts: $167.40
- NPT before credit: $2,801.25
- Credit, 60% of the BIRT net income portion: $2,542.50
- NPT after credit: $258.75
The total city bill is about $4,664, or 6.2 % of profit. BIRT has its own deductions and apportionment rules, so the real figure on the return can differ; the Department of Revenue's forms give the exact computation.
Timing of the 2026 returns
Both taxes for tax year 2026 are filed in 2027, and the BIRT return is due by April 15, 2027, the same day as the federal return. Compared with tax year 2025, both rates moved down slightly, so a freelancer who set money aside at last year's rates has a small cushion: the resident NPT rate went from 3.74% to 3.735%, and the BIRT net income rate from 5.71% to 5.65%.
If the business becomes an S corporation
The S election moves the owner's pay into the Wage Tax. From July 1, 2026 to June 30, 2027, it withholds 3.735% from the wages of residents and 3.425% from nonresidents working in the city (Philadelphia Wage Tax). The corporation still files BIRT. Whether that mix costs less than the NPT route depends on the salary, which the reasonable salary calculator helps estimate.
State tax comes on top of all this, at a flat rate with no standard deduction, as the Pennsylvania page explains. Pittsburgh, the other large city with its own rates, is listed in the local business taxes table.