Quick Answer
Philadelphia's BIRT is a city business tax with two parts: 6.20% on net income over $100,000 and 0.1415% on gross receipts over $100,000. Freelancers earning $150,000 would pay roughly $3,100 in BIRT taxes ($3,100 on income, $71 on receipts) annually.
Best Answer
James Okafor, EA
Established Philadelphia freelancers earning over $100,000 annually
What is Philadelphia BIRT and how does it work?
Philadelphia's Business Income & Receipts Tax (BIRT) is a dual-component city business tax that applies to most freelancers and businesses operating in Philadelphia. The tax has two parts: an income tax component at 6.20% on net income over $100,000, and a receipts tax component at 0.1415% on gross receipts over $100,000.
Unlike federal and state taxes that focus primarily on net income, BIRT also taxes your gross receipts (total revenue before expenses). This makes it unique and potentially costly for high-revenue, low-margin businesses.
Example: $150,000 freelance web designer
Let's say you're a Philadelphia-based web designer with $150,000 in gross receipts and $100,000 in net income after business expenses:
Income Tax Component:
Receipts Tax Component:
Total BIRT: $70.75
Now if your net income was $120,000:
Key factors that determine your BIRT liability
BIRT filing requirements and deadlines
Philadelphia requires annual BIRT returns by April 15th (same as federal taxes). You must file if either your gross receipts OR net income exceeds $100,000. The city also requires quarterly estimated payments if you expect to owe more than $5,000 in BIRT for the year.
According to the Philadelphia Department of Revenue regulations, businesses must register for a Business Income and Receipts Tax Account before beginning operations or within 30 days of exceeding the thresholds.
What you should do
1. Track both gross receipts and net income throughout the year
2. Register for BIRT if you haven't already and expect to exceed $100,000 in either category
3. Make quarterly estimated payments if you expect to owe over $5,000
4. Use our quarterly estimator to calculate your Philadelphia BIRT liability alongside federal and state taxes
5. Consider the timing of large projects near year-end, as BIRT is based on the tax year totals
Key takeaway: Philadelphia BIRT taxes both your net income and gross receipts at different rates, with a $100,000 threshold for each component. Plan for both taxes when your revenue approaches six figures.
Key Takeaway: Philadelphia BIRT taxes both net income (6.20%) and gross receipts (0.1415%) over $100,000, requiring dual tracking and potentially quarterly payments for freelancers earning six figures.
BIRT tax calculation examples for different freelancer income levels
| Annual Gross Receipts | Annual Net Income | Income Tax (6.20%) | Receipts Tax (0.1415%) | Total BIRT |
|---|---|---|---|---|
| $80,000 | $50,000 | $0 | $0 | $0 |
| $120,000 | $80,000 | $0 | $28.30 | $28.30 |
| $150,000 | $100,000 | $0 | $70.75 | $70.75 |
| $150,000 | $120,000 | $1,240 | $70.75 | $1,310.75 |
| $200,000 | $140,000 | $2,480 | $141.50 | $2,621.50 |
More Perspectives
James Okafor, EA
First-year Philadelphia freelancers unsure about city tax obligations
Do I need to worry about BIRT in my first year?
As a new Philadelphia freelancer, you might not need to deal with BIRT immediately, but it's important to understand the rules early. BIRT only applies once you exceed $100,000 in either gross receipts (total revenue) or net income (profit after expenses).
Most first-year freelancers don't hit these thresholds, but if you're transitioning from a high-paying job or landing major clients, you could cross the line unexpectedly.
Simple tracking for BIRT preparation
Even if you don't expect to owe BIRT this year, start tracking both numbers:
Gross receipts: Every dollar that comes in from clients
Net income: Gross receipts minus business expenses
Keep these separate from your federal tax calculations. BIRT follows similar rules to federal taxes for deductions, but the city has specific requirements.
When to register and file
You must register for BIRT within 30 days of exceeding either threshold. Don't wait until year-end if you cross $100,000 mid-year. The Philadelphia Department of Revenue can impose penalties for late registration.
If you stay under both thresholds, you don't need to file a BIRT return at all. But track your numbers carefully — crossing $100,001 in gross receipts means you owe tax on the full amount, not just the excess.
Key takeaway: Most new freelancers won't owe BIRT, but track gross receipts and net income from day one to avoid surprises if you exceed $100,000 in either category.
Key Takeaway: New Philadelphia freelancers should track gross receipts and net income from the start, even if they don't expect to exceed the $100,000 BIRT thresholds in their first year.
Sources
- Philadelphia Department of Revenue BIRT Information — Official BIRT rates, thresholds, and filing requirements
- IRS Publication 334 — Tax Guide for Small Business - federal deduction rules that generally apply to BIRT net income calculations
Reviewed by James Okafor, EA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.