Do I owe tax on a bedroom I rent in my home? Do I need to report this activity at all? Each day, we receive great questions like these from our residents. To make things clearer, we have compiled a few tips to help you understand what City taxes you may be responsible for filing and paying as a live-in landlord:

Renting part of your home is a great way to earn a few extra dollars to help you pay the mortgage and cover other running costs. But as a Philly homeowner renting a room in your home, you are responsible for filing and paying City taxes. This is because the money you receive from your rental activity is considered taxable income under City tax rules. Your tax liability will nevertheless depend on the nature of your activity.

Here’s how that works:

If the rental period is 30 days or less, you must collect Hotel Tax from the tenant and remit it to the City. Many short-term rental platforms include local hotel taxes in their charges, but hosts should make sure. You are also required to file and pay the City’s Net Profits Tax (NPT) and may have a Business Income and Receipts Tax (BIRT) liability on this short-term rental activity.

If the rental period is more than 30 days, you are responsible for filing and paying the City’s School Income Tax (SIT) on this long-term rental activity. All owner-occupied multi-family properties with three rental units or less must report the net rental income they receive on Line 7 of the School Income Tax form.

Don’t miss these tax benefits

Reporting your rental income comes with some tax benefits. You can reduce your net rental income by deducting:

  • Any expenses just for the rented room in your home – such as repairs, depreciation, mortgage interest, and,
  • The portion of the Real Estate tax paid on the rented room.

We encourage you to work with a tax professional who’s familiar with Philadelphia taxes to help you better understand any tax deductions relating to your business.

Keep in mind

The City can update its tax rates yearly. It is therefore important to use the correct tax rates for the correct tax year. For the SIT, BIRT, and NPT rates, please visit www.phila.gov/revenue. But starting in November 2021, please complete online returns and payments for these taxes in the Philadelphia Tax Center. We’ve published a guide to help you get ready for the new system.

In addition to understanding your tax liabilities, please note that you may be required to obtain a Rental license to operate your business.

Visit the Department of Licenses and Inspections’ website to learn more about Rental licenses.