If your business operates in Philadelphia, you know the city’s tax picture plays a meaningful role in your planning. This year brings encouraging news. Philadelphia’s Fiscal Year 2027 (FY27) budget continues a five-year plan that gradually lowers the Business Income and Receipts Tax (BIRT), the city’s tax on business income and receipts.
Each individual reduction is modest. The real value lies in the direction they signal and the planning opportunities they open as you close out 2026. Here is what changed, who it affects, and how to put it to work in your year-end tax strategy.
What changed for BIRT in Philadelphia’s FY27 budget?
Philadelphia’s FY27 budget lowers both portions of BIRT, the net income portion and the gross receipts portion, for the second consecutive year. The cuts are part of a five-year, gradual tax reduction plan Philadelphia City Council approved in June 2025.
| Tax | Previous rate | New rate | When it applies |
|---|---|---|---|
| BIRT, net income portion | 5.71% | 5.65% | Tax year 2026 (filed and paid in 2027) |
| BIRT, gross receipts portion | 1.410 mills | 1.395 mills | Tax year 2026 (filed and paid in 2027) |
How do the new BIRT rates affect your business?
For tax year 2026, BIRT drops to 5.65% on net income and 1.395 mills on gross receipts. These rates build on the reductions that began in tax year 2025, when the net income rate moved to 5.71%.
Consider a business with $10 million in Philadelphia gross receipts and $1 million in taxable net income. At the new rates, its BIRT would be roughly $70,450 ($56,500 on net income plus $13,950 on gross receipts). That is about $750 lower than at last year’s rates. This simplified example sets aside apportionment, credits, and other adjustments that shape an actual return.
A few related points are worth keeping in view:
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- BIRT now applies from the first dollar of receipts. Beginning with tax year 2025, businesses with smaller receipts join the BIRT filing group, which makes early planning and well-organized books especially valuable for growing companies.
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- The Net Profits Tax credit still works in your favor. Businesses that pay both BIRT and the Net Profits Tax can apply a credit worth 60% of the BIRT net income portion they paid.
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- Losses can carry forward. Philadelphia allows businesses to carry losses for up to twenty years, which can help offset BIRT in stronger years ahead.
Where are Philadelphia’s BIRT rates headed next?
The city’s plan calls for continued gradual BIRT reductions through FY30, followed by more significant cuts. By FY39, the plan targets a BIRT net income rate of 2.8% and the elimination of the gross receipts portion.
Each year’s rates take effect through the annual budget process. We recommend revisiting your projections as each new budget is adopted, so your planning stays aligned with the rates that apply.
How can your business plan around these changes before year-end?
These rate changes deliver the most value as one input in a broader planning conversation. A few practical steps for the weeks ahead:
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- Model your 2026 BIRT liability at the new rates. Include the Net Profits Tax credit so you see your true combined cost.
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- Update your cash flow forecast. Factor the new rates into estimated payment planning and 2027 budgeting.
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- Connect local planning to the bigger picture. Philadelphia taxes interact with your federal and Pennsylvania strategy, so align decisions across local, state, and federal planning.
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- Build a multi-year view. With further reductions planned through FY30, a forward-looking projection helps you make confident timing and investment decisions.
Frequently asked questions
When do the new Philadelphia BIRT rates take effect?
The new BIRT rates of 5.65% on net income and 1.395 mills on gross receipts apply to tax year 2026. Businesses file and pay those returns in 2027.
Will Philadelphia BIRT rates continue to go down?
The city’s plan calls for further BIRT reductions through FY30, with each year’s rates set in the annual budget. By FY39, the plan targets a 2.8% net income rate and the elimination of the gross receipts portion.
Who files BIRT beginning with tax year 2025?
Beginning with tax year 2025, businesses operating in Philadelphia file and pay BIRT on their receipts, including those that previously fell below the $100,000 threshold.
How hfco Can Help
Rate changes create the most value when they are part of a bigger conversation about where your organization is headed. At hfco, we work alongside privately held organizations, nonprofits, and family-owned businesses across NJ, PA, NY, DE, MD, and NC to connect local, state, and federal tax planning with your broader goals.
Whether you are modeling your 2026 BIRT liability, planning estimated payments, or building a multi-year plan, our team starts by listening. From there, we help you see the full picture and move forward with confidence. Reach out to start the conversation.
Solutions through Listening.
Sources
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- What you need to know about changes to Philly’s Use and Occupancy Tax, City of Philadelphia Department of Revenue, June 11, 2026
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- Philadelphia business tax changes starting in FY26, City of Philadelphia
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- Philly extends deadline for relief program, announces tax cuts, City of Philadelphia, June 18, 2025
