Changes to Philadelphia Wage Tax, BIRT and Real Estate Tax Announced

On Thursday June 12^th, Philadelphia City Council approved a number of tax and spending bills related to the City’s budget for the fiscal year beginning July 1^st. Below are some key changes that will impact businesses and individuals in Philadelphia.

Individual Taxes

Resident and nonresident individuals working in the city will see a small reduction in City tax withholding.

• Philadelphia Residents: The Philadelphia wage tax rate for will be reduced from 3.75% to 3.74%, with further reductions in the rate over five years to 3.7% by 2030.
• Nonresidents working in Philadelphia: The Philadelphia wage tax rate will be reduced from 3.44% to 3.43%, with further reductions over five years to 3.39% by 2030.

Business Taxes

Business tax rates will be reduced, but a commonly used exclusion will be eliminated.

• Business Income and Receipts Tax (“BIRT”) – Gross Receipts
  • The BIRT rate on gross receipts will be reduced from 0.1415% to 0.141% for the next tax year.
  • The rate will be further reduced annually until the gross receipts tax is fully eliminated by 2039.
  • The provision allowing BIRT filers to exclude the first $100,000 of gross receipts from taxation will be eliminated. This means that some taxpayers who have gross receipts from sources in Philadelphia but were not required to pay tax may now have a payment obligation.
• Business Income and Receipts Tax (“BIRT”) – Net Income
  • The BIRT rate on net income will be reduced from 5.81% to 5.71% next year.
  • The rate will be further reduced annually to a final rate of 2.8% in 2039.

Real Estate Taxes

Philadelphia’s real estate transfer tax will increase from 3.278% to 3.578% on sales of real estate within the city.

As always, should you have questions on this or other matters affecting you or your business, please call 215.675.8364 or email us to speak with a CPA today.

DISCLAIMER: All communications by Wouch, Maloney & Co., LLP intend to provide general information, as of the date of the communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. Please be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

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