Philadelphia Businesses Should Prepare for Changes to the Use & Occupancy Tax

Philadelphia businesses that use or occupy real estate for commercial purposes should be aware of an important tax change that took effect in 2026.

The City of Philadelphia has eliminated the annual $2,000 Use & Occupancy (U&O) Tax exemption, meaning businesses that previously benefited from the exemption may now see increased tax liabilities and filing obligations. The change applies beginning January 1, 2026, with the first payment due on January 25, 2026.

The U&O Tax is imposed on the commercial use or occupancy of real estate located in Philadelphia and is generally calculated based on the property’s assessed value. Prior to 2026, all taxpayers received a $2,000 annual exemption that reduced or eliminated tax liability for some businesses. That exemption is no longer available.

As a result, many businesses may experience higher tax bills and should review their budgets, cash flow projections, and compliance procedures. Businesses that lease or own commercial property in Philadelphia should ensure they understand their filing requirements and payment deadlines, as U&O tax returns are generally due monthly.

This change comes alongside other Philadelphia tax updates, including the elimination of the Business Income and Receipts Tax (BIRT) exemption, signaling a broader shift in the City’s tax landscape. Businesses that have historically been exempt from certain Philadelphia taxes may now need to reassess their compliance obligations.

Proactive tax planning can help businesses understand the financial impact of these changes, avoid surprises, and remain compliant with Philadelphia tax requirements.