Understanding Philly NPT and BIRT for Rental Properties

If you own rental property in Philadelphia, it’s important to understand local taxes for financial success. In this guide, we’ll explain two key taxes – the Net Profits Tax (NPT) and the Business Income and Receipts Tax (BIRT). This will help you make better decisions and plan your taxes smartly.

What is NPT for Rentals?

The NPT in Philadelphia is imposed on the net profits from all unincorporated businesses, including rental activities. This applies to both residents of Philadelphia, regardless of where the rental property is located, and non-residents who own rental properties in the city.

Key Considerations for Rental Property Owners:

• Taxable Income Calculation: For rental properties, NPT is calculated on the net profits derived from these properties within Philadelphia. The 2023 tax rates are 3.75% for residents and 3.44% for non-residents.
• Filing Requirements: All rental property owners must file an NPT return, even if the property operates at a loss.
• Credit: Rental property owners may be eligible for a credit on NPT, based on their BIRT obligations.
• Exemptions and Deductions: Opportunities for exemptions and deductions specific to rental properties exist, like depreciation and maintenance costs. We’ll help you identify and leverage these opportunities to minimize your tax burden. 

Understanding BIRT for Rentals

The Business Income and Receipts Tax (BIRT) for rental properties is a tax on the gross income and net earnings from renting out property. This tax applies to anyone who owns rental properties in Philadelphia, whether they’re individuals or businesses, and aims to tax the income made from these rentals.

Key Points for Landlords:

• Gross Receipts and Net Income: BIRT calculates taxes on both gross receipts and net income from rental activities.
• Tax Rates: In 2023, the BIRT rates are 0.1415% on gross receipts and 5.81% on taxable net income for rental properties.
• Threshold for Filing: Rental entities with less than $100,000 in Philadelphia gross receipts may be exempt from filing BIRT.
• Filing Deadline: BIRT for rental properties must be filed and paid by April 15 each year, with possible extensions for filing (not payment).
• Credits and Incentives: Rental property owners may be eligible for various tax credits against BIRT liabilities, like the Sustainable Business Tax Credit, Green Roof Tax Credit, etc. Our team can help you determine the eligibility of each credit. 

Need help?

Handling taxes for rental properties in Philadelphia can be tricky. At DimovTax, we’re here to guide you through it, making sure you follow the rules and get the most out of your tax benefits. If you need help with NPT and BIRT for your rentals, just reach out to us today.