Most Pennsylvania workers pay a local earned income tax (EIT) on top of the state's flat 3.07% income tax. It's levied by your municipality and school district, often around 1% combined, and your employer usually withholds it from every paycheck. Philadelphia has its own wage tax, which is higher.
Because rates are set locally and differ from place to place, this guide explains how Pennsylvania local tax works rather than listing rates. You'll see how employers decide what to withhold, what to check on your pay stub, and a worked example.
What Pennsylvania local tax on wages is
The EIT is a flat percentage tax on earned income: wages, salaries, commissions, bonuses and, for self-employed people, net business profits. It doesn't apply to investment income like interest or dividends.
Two layers of local government can levy it:
- Your municipality (city, borough or township).
- Your school district.
The two shares are usually combined into one resident rate. That's why two neighbors in different school districts, or on opposite sides of a township line, can have different rates. To find yours, check your municipality's or tax collector's website, or look at a recent pay stub.
How it fits with Pennsylvania state tax
Pennsylvania's state income tax is a flat 3.07% with no standard deduction or personal exemption. Unlike most states, Pennsylvania taxes your 401(k) contributions. Employees also pay 0.07% of wages toward unemployment insurance. The EIT is a separate line on top of all of this.
Resident rates vs work-location rates
Pennsylvania's local tax system looks at two places: where you live and where you work.
- Resident rate: the EIT rate set by the municipality and school district where you live.
- Nonresident rate: some municipalities also set a rate for people who work there but live elsewhere.
In general, your employer compares the two and withholds at the higher rate, then sends the tax to the right collector. You don't pay both in full. If you work in a place with no nonresident rate, your resident rate is what gets withheld.
Your employer needs your home address and work location to get this right. Many employers have new hires complete a residency certification form for local tax. If you move, update your address with payroll so the withholding follows you.
Philadelphia
Philadelphia levies its own wage tax, which is higher than a typical EIT. It applies to residents and, at a separate rate, to nonresidents who work in the city. If you live or work in Philadelphia, check the city's current rates and how they interact with any EIT where you live.
Worked example: a $58,000 salary with a 1% local rate
Say you're single, earn $58,000 a year and are paid biweekly (26 paychecks). We'll use a 1% local rate as an example, since that's in the common range, but your actual rate may differ. All figures are estimates from our calculator.
| Per biweekly paycheck | No local tax entered | With 1% local tax | 1% local tax + 5% 401(k) |
|---|---|---|---|
| Gross pay | $2,230.77 | $2,230.77 | $2,230.77 |
| 401(k) contribution | $0.00 | $0.00 | $111.54 |
| Federal income tax | $183.85 | $183.85 | $170.46 |
| Social Security + Medicare | $170.66 | $170.66 | $170.66 |
| PA income tax (3.07%) | $68.48 | $68.48 | $68.48 |
| PA unemployment (0.07%) | $1.56 | $1.56 | $1.56 |
| Local earned income tax | $0.00 | $22.31 | $22.31 |
| Take-home pay | $1,806.22 | $1,783.91 | $1,685.76 |
A 1% local tax costs this worker about $22 per paycheck, or about $580 a year. If the combined local rate were higher, the cost would scale with it.
The third column shows a Pennsylvania quirk. The 401(k) contribution lowers federal income tax, but the Pennsylvania state tax stays at $68.48 because Pennsylvania taxes 401(k) contributions. Our calculator applies the local rate to the same wages Pennsylvania taxes, so the local line stays at $22.31 too. Check with your local tax collector if you want to confirm how your EIT treats retirement contributions.
To run your own numbers, open the Pennsylvania paycheck calculator and enter your combined local rate in the local tax box, or use the main paycheck calculator. Our guide to how a 401(k) affects take-home pay covers the federal side in more detail.
Other local items on a Pennsylvania pay stub
The EIT isn't the only local deduction you may see.
- Local Services Tax (LST): a small flat tax many municipalities charge people who work there, usually withheld in pieces across the year. It's based on where you work, not where you live.
- Philadelphia wage tax: shown instead of, or alongside, an EIT line if you live or work in the city.
If a line on your stub is unfamiliar, ask your payroll department which jurisdiction it's for. Our guide on how to read your pay stub can help you match each line.
Situations that need extra attention
Working in Pennsylvania but living in another state
Pennsylvania and New Jersey have a reciprocity agreement for state income tax, so New Jersey residents working in Pennsylvania generally don't owe Pennsylvania state tax on those wages. Local tax rules for nonresidents are separate and depend on where you work. See our guides to state tax reciprocity agreements and the New Jersey paycheck calculator.
Self-employment and side income
If you're self-employed, no employer withholds EIT for you. You'll generally need to pay it on your net profits directly to your local tax collector, often through estimated payments.
Annual local returns
Depending on where you live, you may need to file an annual local earned income tax return even if your employer withheld the tax all year. Your local tax collector can tell you whether a return is required.
Moving within Pennsylvania
Your resident rate can change when you move, even a short distance. Update payroll right away so the new rate starts on your next paycheck.
Frequently Asked Questions
Does everyone in Pennsylvania pay local earned income tax?
Most Pennsylvania workers do, because most municipalities and school districts levy it. Philadelphia has its own wage tax, which applies to residents and to nonresidents who work in the city.
What is the Pennsylvania local tax rate?
It depends on where you live and work. Many combined rates are around 1%, but you should check your own municipality's and school district's rate before relying on any figure.
Why is local tax withheld for the place I work instead of where I live?
When the work location has a nonresident rate higher than your resident rate, employers generally withhold at the higher rate. That doesn't mean you're taxed twice.
Is local earned income tax included in your calculator?
Yes, if you enter it. Type your combined local rate into the calculator's local tax box and it will be applied to your wages.
Sources
- Tax Foundation: State Individual Income Tax Rates and Brackets, 2026
- IRS Publication 15, Employer's Tax Guide
- IRS: 401(k) limit increases to $24,500 for 2026
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.