Philadelphia Tax Exemptions Coming to an End: What Your Business Needs to Know

Philadelphia has announced important changes to its tax policies that will impact businesses beginning with the 2025 tax year. Two key exemptions that many taxpayers have relied on will be eliminated:

• The $100,000 Business Income and Receipts Tax (BIRT) exemption will no longer apply when you file your 2025 taxes in 2026.
• The $2,000 Use and Occupancy (U&O) Tax exemption will expire January 1, 2026.

What This Means for Businesses

• BIRT: Since 2015, businesses with less than $100,000 in taxable gross receipts did not have to file or pay BIRT. Due to a legal challendge, beginning with the 2025 tax year, that exemption will no longer exist, and all businesses will be required to file and pay.
• U&O Tax: The $2,000 annual U&O exemption will no longer be available to taxpayers using or occupying Philly properties for business purposes after December 2025. The U&O tax is due on the 25th of each month, though some taxpayers may qualify to pay annually. The first payment without the exemption is due January 25, 2026.

Planning Ahead

While these changes may increase your BIRT liability, you can apply a credit of 60% of the BIRT’s net income portion against your Net Profits Tax (NPT). This offset may reduce the overall impact on your tax bill.

Because these changes will bring many businesses into filing and payment requirements for the first time, now is the time to prepare.

How Haefele Flanagan Can Help

Our team is closely monitoring these developments and is ready to guide your business through the transition. We’ll help you understand your filing obligations, plan for potential liabilities, and identify opportunities to minimize your overall tax burden.

If your business operates in Philadelphia, don’t wait until 2026 to start planning. Contact us today to discuss how these changes may affect you and ensure you’re ready when the exemptions expire.

Source: City of Philadelphia Department of Revenue