What Are the Tax Rates in Philadelphia?

Philadelphia’s tax structure encompasses a range of levies on income, property, and transactions, creating a comprehensive system that funds various city and school services. Understanding these different taxes, their rates, and who is responsible for paying them is important for residents, workers, and businesses operating within the city.

Philadelphia Wage Tax

The Philadelphia Wage Tax is a significant component of the city’s revenue, applying to both residents and non-residents who earn income within city limits. For residents of Philadelphia, the wage tax applies to all earned income regardless of where the work is performed. Non-residents, however, are subject to this tax only on income earned from work physically performed within Philadelphia.

Effective July 1, 2025, the wage tax rate for Philadelphia residents is 3.74 percent, while non-residents are taxed at a rate of 3.43 percent. Employers typically withhold this tax from employee paychecks. The city maintains a “convenience of the employer” rule regarding remote work for non-residents. If an employer requires a non-resident employee to work outside of Philadelphia, the wages earned outside the city are not subject to the Philadelphia Wage Tax.

If a non-resident employee chooses to work remotely outside Philadelphia for their own convenience, those wages remain subject to the Wage Tax. Non-residents who believe they have overpaid due to work performed outside the city can request a refund. Refund requests, along with necessary documentation, are submitted through the Philadelphia Tax Center. Low-income taxpayers may also qualify for a refund if they are approved for Pennsylvania tax forgiveness. All refund claims must be filed within three years from the date the tax was paid or due, whichever is later.

Philadelphia Property Tax

Real estate within Philadelphia is subject to the city’s Real Estate Tax, commonly known as property tax. This tax is levied annually on the assessed value of the property. The current real estate tax rate is 1.3998 percent of a property’s taxable value.

Property assessments are determined by the Office of Property Assessment (OPA), which considers factors such as the property’s size, location, and condition. A significant relief program for homeowners is the Homestead Exemption, which reduces the taxable portion of a primary residence’s assessed value.

Starting in 2025, the Homestead Exemption will reduce a property’s assessed value by $100,000, which is projected to save most eligible homeowners approximately $1,399 per year on their property tax bill. To qualify, a property must be owner-occupied and serve as the owner’s primary residence. Homeowners can apply for this exemption once, and it does not require reapplication unless the property’s deed changes. Applications for the Homestead Exemption can be submitted online through the Philadelphia Tax Center.

Philadelphia Sales Tax

Transactions within the city are subject to a combined state and county sales tax. The total sales tax rate in Philadelphia is 8.0 percent. This combined rate consists of two distinct components.

The first component is the Pennsylvania state sales tax, which is applied at a rate of 6.0 percent. The second component is an additional 2.0 percent local sales tax levied by Philadelphia County. This means that when a taxable purchase is made in Philadelphia, the 6.0 percent state tax and the 2.0 percent county tax are both applied, resulting in the 8.0 percent combined rate. The sales tax applies to a wide range of goods and services, though certain items such as most food and clothing are exempt.

Other Philadelphia Taxes

Philadelphia imposes several other taxes that primarily affect businesses and specific transactions. These taxes contribute to the city’s overall revenue and address various economic activities.

Business Income and Receipts Tax (BIRT)

The Business Income and Receipts Tax (BIRT) is levied on for-profit businesses operating within Philadelphia. This tax has two components: one on gross receipts and another on taxable net income. Current BIRT rates are 0.1415 percent on gross receipts and 5.81 percent on taxable net income. Businesses with $100,000 or less in Philadelphia taxable gross receipts are generally exempt from filing the BIRT.

Net Profits Tax (NPT)

The Net Profits Tax (NPT) applies to the net profits of unincorporated businesses, including sole proprietorships, partnerships, and S corporations. This tax is imposed on both Philadelphia residents and non-residents conducting business in the city, with current rates of 3.75 percent for residents and 3.44 percent for non-residents, mirroring the wage tax rates. Rental property income can also be subject to NPT.

School Income Tax (SIT)

Philadelphia residents are also subject to the School Income Tax (SIT), which is levied on certain types of unearned income. The current SIT rate is 3.75 percent. Taxable unearned income includes dividends, royalties, S-Corp distributions, gambling winnings, and short-term capital gains, while interest from savings or checking accounts and government bonds are exempt.

Real Estate Transfer Tax (RETT)

The Real Estate Transfer Tax (RETT) is imposed on the sale or transfer of real estate located within Philadelphia. The current rate for this tax is 4.278 percent of the property’s sale price or assessed value. This tax is split evenly between the buyer and the seller. The Real Estate Transfer Tax is due when the sale document is presented for recording.