Philadelphia charges more separate local taxes than almost any other U.S. city, and the local tax rates in Philadelphia change on a regular schedule. For fiscal year 2026 (effective July 1, 2025), the Wage Tax is 3.74% for residents and 3.43% for non-residents, the combined real estate tax rate is 1.3998%, and the local 2% sales tax brings the register total to 8% when stacked on Pennsylvania’s 6% state rate. Alongside those three, the city runs separate taxes on business income, net profits, unearned income, real estate transfers, sweetened beverages, hotel stays, and commercial property use.
Wage Tax
Anyone earning wages, salaries, or commissions in Philadelphia owes the Wage Tax under Philadelphia Code Chapter 19-1500. Effective July 1, 2025, the resident rate dropped to 3.74% and the non-resident rate dropped to 3.43%, down from 3.75% and 3.44% the year before.1City of Philadelphia. Philly Extends Deadline for Relief Program, Announces Tax Cuts
Employers withhold the tax from every paycheck. If your employer withholds the wrong amount, you still owe the balance directly to the Department of Revenue, and late payments trigger monthly interest and penalties.
Non-Resident Remote Work Refunds
If you live outside Philadelphia and your employer withholds the Wage Tax on your full salary, you can claim a refund for days you physically worked outside the city. Residents don’t qualify, because they owe the tax regardless of where they work. Filing requires a signed employer letter on the city’s official template and a completed date-and-location worksheet. You have three years from the date the tax was paid or was due (whichever is later) to file through the Philadelphia Tax Center.2City of Philadelphia. Request a Wage Tax Refund
School Income Tax
Philadelphia residents owe the School Income Tax (SIT) on unearned income: dividends, royalties, short-term capital gains, savings interest, partnership distributions not already taxed as business profit, and similar passive income. The current rate is 3.74%, matching the resident Wage Tax rate.1City of Philadelphia. Philly Extends Deadline for Relief Program, Announces Tax Cuts Non-residents don’t owe SIT, even on investment income tied to Philadelphia sources. Returns are due April 15 each year through the Philadelphia Tax Center.
Net Profits Tax
Self-employed individuals, freelancers, and partners in unincorporated businesses owe the Net Profits Tax (NPT) on their share of business earnings. For tax year 2025 (due April 15, 2026), the rates are 3.74% for residents and 3.43% for non-residents.3City of Philadelphia. Net Profits Tax These rates track the Wage Tax.
The NPT does not replace the Business Income and Receipts Tax. If you file both, you can take a credit on your NPT for what you paid on the net income portion of BIRT.3City of Philadelphia. Net Profits Tax The credit prevents full double taxation on the same income.
Business Income and Receipts Tax
Every business operating in Philadelphia owes the Business Income and Receipts Tax (BIRT) under Philadelphia Code Chapter 19-2600. BIRT has two components: 1.410 mills on gross receipts ($1.41 per $1,000) and 5.71% on net income.4City of Philadelphia. Business Income and Receipts Tax (BIRT) Both corporations and sole proprietors file annually by April 15, and even businesses that owe nothing must submit a return.
Starting with tax year 2025, the city eliminated the $100,000 gross receipts exemption that had previously shielded most small businesses from the receipts portion.4City of Philadelphia. Business Income and Receipts Tax (BIRT) Even low-revenue operations now owe the receipts tax from the first dollar. Late payments carry 1.25% monthly interest plus a separate 1% monthly penalty on the unpaid balance.5American Legal Publishing. Philadelphia Code 19-2608 – Interest and Penalties
Real Estate Tax
Philadelphia’s real estate tax applies to every property based on the assessed value set by the Office of Property Assessment. For tax year 2025, the combined rate is 1.3998%: 0.6159% for the City and 0.7839% for the School District of Philadelphia.6City of Philadelphia. Real Estate Tax Bills go out in December and are due by March 31 of the following year.7City of Philadelphia. Three Upcoming Deadlines for Philly Property Owners
Relief Programs
Homeowners who occupy their property as a primary residence can apply for the Homestead Exemption, which subtracts $100,000 from the assessed value before the rate is applied. On a home assessed at $250,000, that saves roughly $1,400 a year.8City of Philadelphia. Get the Homestead Exemption
The Longtime Owner Occupants Program (LOOP) caps assessment jumps for residents who have owned and lived in their home for at least 10 years, are current on taxes, meet income limits, and have seen an assessment rise of at least 50% year over year or 75% over five years.9City of Philadelphia. Apply for the Longtime Owner Occupants Program (LOOP)
The Senior Citizen Real Estate Tax Freeze locks the tax bill at its current amount for qualifying homeowners age 65 or older, or a widow or widower age 50 or older whose spouse reached 65 before passing. Income limits are $33,500 for a single person and $41,500 for a married couple.10City of Philadelphia. Apply for the Senior Citizen Real Estate Tax Freeze
If you think your property is overvalued, you can appeal to the Board of Revision of Taxes by the first Monday in October of the year before the tax year you’re contesting. New owners buying after that date get 30 days from the deed date.11City of Philadelphia. Property Assessment Appeals
Realty Transfer Tax
When real estate changes hands in Philadelphia, both buyer and seller owe the Realty Transfer Tax. As of July 1, 2025, the city’s portion is 3.578% and the state adds 1%, for a combined 4.578% of the sale price.12City of Philadelphia. Philly’s Realty Transfer Tax Rate Is Now 4.578% On a $300,000 home that comes to roughly $13,734. Buyer and seller customarily split the tax evenly, though the agreement of sale can allocate it differently. It’s one of the highest transfer tax rates in the country.
Sales, Use, and Hotel Occupancy Tax
Philadelphia adds a local 2% sales tax to Pennsylvania’s 6% state sales tax, for a combined 8% at the register on most goods and taxable services within city limits.13American Legal Publishing. Philadelphia Code 19-2702 – Additional Sales and Use Tax Retailers collect and remit the full amount to the state, which returns the city’s share. Failing to remit collected tax can cost a business its Commercial Activity License.
Hotel stays carry more. The city adds a 1% Hotel Occupancy Tax on top of the 6% state rate for 7% total, plus a separate 8.5% Hotel Room Rental Tax that stacks on the standard sales tax.14City of Philadelphia. Sales, Use, and Hotel Occupancy Tax That’s why hotel bills in Philadelphia carry such a heavy tax line.
Beverage Tax
Philadelphia’s Beverage Tax covers sweetened drinks, including both sugar-sweetened and artificially sweetened varieties. The rate is 1.5 cents per ounce and has stayed unchanged since the tax launched in January 2017. That works out to about $1.01 on a 2-liter bottle and $0.18 on a 12-ounce can. Distributors pay the tax, but the cost is almost always passed through at the shelf.
Use and Occupancy Tax
Property used for business purposes in Philadelphia is subject to the Use and Occupancy Tax at 1.21% of assessed value.15City of Philadelphia. Use and Occupancy Tax The owner files and pays monthly by the 25th, and landlords collect it from commercial tenants. The $2,000 annual exemption that had shielded smaller operations expired December 31, 2025, so all business properties owe the tax in full starting in 2026.