Local income taxes on wages show up in a handful of states, most heavily in Ohio, Pennsylvania, Maryland, Indiana, Kentucky and Michigan. In those states, a city, county or school district can take a separate cut of your pay on top of state income tax, and sometimes the local tax is the larger of the two.
Other states have narrower local taxes: a single city, a flat monthly fee, or a tax that only hits higher incomes. Here is where each one applies, how they're usually calculated, and what a local income tax looks like on a real paycheck.
States where local income tax is widespread
In these states, most workers pay some form of local wage tax. The descriptions come from our 2026 state data.
| State | Who levies it | Typical rate |
|---|---|---|
| Indiana | All 92 counties | About 1% to 3% |
| Maryland | Every county and Baltimore City | Roughly 2.25% to 3.3% |
| Ohio | Most cities and villages, plus some school districts | Commonly 1% to 2.5% for cities |
| Pennsylvania | Most municipalities and school districts | Often around 1%; Philadelphia's wage tax is higher |
| Kentucky | Many cities and counties (occupational license taxes) | Varies; common in Louisville and Lexington |
| Michigan | Detroit and about two dozen other cities | Varies; residents pay a higher rate than nonresident workers |
In Maryland and Ohio especially, the local line can be one of the biggest deductions on your pay stub. Maryland's combined state and local rates are among the highest in the country even though the state's own top rate is 6.5%.
States with more limited local taxes
In several other states, a local income tax exists but only in specific places or in a limited form:
- New York: New York City and Yonkers levy their own income taxes. See our guide to the New York City income tax.
- Missouri: Kansas City and St. Louis levy a 1% earnings tax on residents and on people who work in the city.
- Alabama: some cities and counties, such as Birmingham, levy occupational taxes on wages.
- Delaware: Wilmington levies a city wage tax.
- Iowa: many school districts add a small income surtax.
- Colorado: Denver, Aurora and a few other cities charge a small flat monthly occupational privilege tax rather than a percentage.
- Oregon: Portland-area residents may owe the Metro and Multnomah County preschool income taxes on higher incomes.
New Jersey is a useful exception: Newark has a payroll tax, but it's paid by employers, not withheld from employees.
How a local income tax is calculated
Local wage taxes vary more than state taxes do, but most follow one of a few patterns:
- Flat percentage of wages. Common in Ohio, Pennsylvania and Kentucky. The tax is a set rate applied to your earnings.
- Percentage tied to your state return. Maryland's county taxes and Indiana's county taxes work alongside the state income tax.
- Flat dollar amount. Colorado's occupational privilege taxes are a fixed monthly charge.
Where you live vs. where you work
Many local taxes apply based on where you live, where you work, or both. Some cities charge residents and nonresident workers different rates, as Michigan cities do. In places with both a work-city tax and a home-city tax, a credit for one against the other may reduce the total, but the rules differ by locality. Your employer withholds based on the information you give them, so it's worth confirming your home address and work location are correct in payroll. For the rules in your area, check your city, county or state revenue department.
Worked examples: what a local tax costs per paycheck
Our paycheck calculator has a local tax box where you enter your local rate as a percentage. It applies that rate to your wages as a simple estimate. The rates below are illustrations within the typical ranges, not the rate for any specific city or county.
Ohio: $65,000 single, biweekly, 2% city tax
| Per paycheck (26 per year) | Without local tax | With 2% local tax |
|---|---|---|
| Gross pay | $2,500.00 | $2,500.00 |
| Federal income tax | $216.15 | $216.15 |
| Social Security | $155.00 | $155.00 |
| Medicare | $36.25 | $36.25 |
| Ohio income tax (estimate) | $38.92 | $38.92 |
| Local income tax | $0.00 | $50.00 |
| Net pay | $2,053.68 | $2,003.68 |
The city tax costs $1,300 a year, more than the estimated $1,012 in Ohio state income tax. That's why many Ohio workers notice their city tax first.
Maryland: $85,000 married filing jointly, semimonthly, 3% county tax
| Per paycheck (24 per year) | Without local tax | With 3% local tax |
|---|---|---|
| Gross pay | $3,541.67 | $3,541.67 |
| Maryland state income tax | $140.11 | $140.11 |
| Local income tax | $0.00 | $106.25 |
| Net pay | $2,887.30 | $2,781.05 |
Federal income tax ($243.33), Social Security ($219.58) and Medicare ($51.35) are the same in both columns. The county tax adds about $2,550 a year. Because Maryland's county tax is generally figured from Maryland taxable income rather than gross wages, the real amount will usually be a bit lower than this simple estimate. All figures are estimates.
How to find your local rate
- Check your pay stub. Local taxes often appear with the city, county or school district name.
- Look up your locality. Your state revenue department usually publishes local rates or links to the agencies that collect them.
- Enter it in the calculator. Open your state's calculator, such as the Ohio paycheck calculator, the Maryland paycheck calculator or the Pennsylvania paycheck calculator, and add the rate in the local tax box.
State-specific guides go deeper: the Ohio municipal income tax, the Pennsylvania local earned income tax and Maryland county income tax.
Frequently Asked Questions
Do all states allow local income taxes?
No. Most states don't have local wage taxes at all. They're concentrated in states like Ohio, Pennsylvania, Maryland, Indiana, Kentucky and Michigan, plus specific cities elsewhere.
Can I have a local income tax in a state with no state income tax?
Among the nine states without a wage tax, our data shows no local wage taxes withheld from employees. Check with your city if you're unsure.
Is local income tax withheld automatically?
Usually, if your employer knows your locality. If your employer doesn't withhold it, you may need to pay the local tax yourself, so check with your local tax agency.
Does a 401(k) contribution lower my local tax?
It depends on the locality. Some local taxes apply to wages before 401(k) deferrals are subtracted, so check your local rules.
Sources
- Tax Foundation: State Individual Income Tax Rates and Brackets, 2026
- IRS Publication 15, Employer's Tax Guide
Run the numbers for your state
Written and checked against IRS, Social Security Administration and state tax agency publications for the 2026 tax year. General information, not tax, legal or financial advice. Read our editorial policy, calculation methodology and sources.