Philadelphia Wage Tax 2026: 3.735% for Residents, 3.425% for Commuters
Philadelphia takes 3.735% of residents' pay and 3.425% of non-residents' pay for work in the city, on paychecks dated July 1, 2026 or later.
Philadelphia’s Wage Tax is 3.735% of pay for people who live in the city and 3.425% for people who live elsewhere and work in it. Those rates apply to paychecks dated July 1, 2026 or later. Residents owe it on everything they earn, wherever they work. Non-residents owe it on pay for work done in the city.
The Wage Tax and the Earnings Tax are one tax with two names. In the city’s words, “The Wage Tax is the same thing as the Earnings Tax, but it has a different name when it’s withheld from your paycheck by an employer” (City of Philadelphia, Earnings Tax). It takes the place of the local earned income tax that the rest of Pennsylvania pays under Act 32, and it follows its own rules, set out below.
What are the Philadelphia Wage Tax rates in 2026?
From July 1, 2026, the rates are 3.735% for residents and 3.425% for non-residents. From July 1, 2025 until then they were 3.74% and 3.43%. The rate depends on the date a paycheck is paid, not the dates worked: when the city cut the rate in 2025 it said that “any paycheck that is issued with a pay date after June 30, 2025, must have the City of Philadelphia Wage Tax withheld at the new rates for residents and nonresidents” (City of Philadelphia, June 18, 2025).
The city has scheduled more small cuts every July 1. Its tax rate history lists 3.73% and 3.42% from July 1, 2027, 3.72% and 3.41% from July 1, 2028, and 3.70% for residents and 3.39% for non-residents from July 1, 2029 on. The table shows each step since 2022.
| Pay dates | Residents | Non-residents |
|---|---|---|
| July 1, 2022 to June 30, 2023 | 3.79% | 3.44% |
| July 1, 2023 to June 30, 2025 | 3.75% | 3.44% |
| July 1, 2025 to June 30, 2026 | 3.74% | 3.43% |
| July 1, 2026 to June 30, 2027 today | 3.735% | 3.425% |
| July 1, 2027 to June 30, 2028 scheduled | 3.73% | 3.42% |
| July 1, 2028 to June 30, 2029 scheduled | 3.72% | 3.41% |
| July 1, 2029 on scheduled | 3.7% | 3.39% |
Sources: Tax rate history, City of Philadelphia, Department of Revenue; Wage Tax (employers), City of Philadelphia, Department of Revenue. Checked October 28, 2026.
Because the rate changed in the middle of 2026, a full year of 2026 pay was taxed at two rates: 3.74% or 3.43% on paychecks from January to June, and 3.735% or 3.425% from July. The gap is small. On a $60,000 salary, half a year at a rate 0.005 points higher comes to about $1.50.
Who has to pay the Wage Tax?
Two groups pay it. The city’s income tax regulations put the tax “on residents of Philadelphia, regardless of the place where their services are performed, and on non-residents of this City, for work done or services rendered in Philadelphia, on salaries, wages, commissions, and other compensation earned.”
- Residents pay 3.735% on all of their pay, even when the job is in another town or another state. The city puts it plainly: “All employed Philadelphia residents owe the Wage Tax, regardless of where they work” (Wage Tax).
- Non-residents pay 3.425% on pay for work they do in Philadelphia. That includes people from the suburbs, from New Jersey, from Delaware and from anywhere else.
Your employer usually takes the tax out of each paycheck. The Pennsylvania Department of Community and Economic Development (DCED), which keeps the state’s register of local tax rates, says that for a Philadelphia resident who works elsewhere in the state, “Act 32 does not apply. Employers are required to withhold the Philadelphia resident rate for employees who live in Philadelphia, but work outside of Philadelphia” (DCED, Local Withholding Tax FAQs). The city’s guidance for employers goes further: “The Commonwealth of Pennsylvania requires all employers, regardless of their location in Pennsylvania, to withhold and remit Wage Tax on behalf of their employees who are Philadelphia residents regardless of where they perform their duties.”
Employers outside Pennsylvania are the exception. “Out-of-state employers are not required to withhold Philadelphia’s Wage Tax if they don’t have a physical location within Pennsylvania or aren’t subject to the Business Income and Receipts Tax (BIRT). When no Wage Tax is withheld, Philadelphia residents must file and pay the Earnings Tax themselves” (Earnings Tax).
Philadelphia has no local services tax and no separate school district earned income tax: DCED’s register of local rates shows $0 and 0% for both. The Wage Tax is the whole local tax on a Philadelphia paycheck. A Philadelphian who works in a suburb can still owe that suburb’s local services tax, because that tax goes by the place you work.
How much Wage Tax comes out of a paycheck?
Multiply your gross pay by the rate. Here is the whole paycheck for a resident and for a commuter, worked out by the calculator’s own rules:
Take someone single paid $60,000 a year, every two weeks, living and working in the city of Philadelphia. Each paycheck is $2,307.69 before anything is taken out. Out of it come federal income tax $193.08, Social Security $143.08, Medicare $33.46, Pennsylvania income tax $70.85, the state unemployment tax $1.62 and the Philadelphia wage tax (3.735%) $86.19. That leaves $1,779.41 a paycheck, $46,264.66 over the year: 77.1% of the pay.
Take someone married (filing jointly) paid $85,000 a year, twice a month, living in Lower Merion Township and working in the city of Philadelphia. Each paycheck is $3,541.67 before anything is taken out. Out of it come federal income tax $243.33, Social Security $219.58, Medicare $51.35, Pennsylvania income tax $108.73, the state unemployment tax $2.48 and the Philadelphia wage tax (3.425%) $121.30. That leaves $2,794.90 a paycheck, $67,077.60 over the year: 78.9% of the pay.
Try your own pay below. The calculator starts with someone who lives and works in Philadelphia; change where you live or work to see the non-resident rate.
Do I pay the Wage Tax when I work from home?
If you live in Philadelphia, yes: residents owe the tax on all pay, wherever the work is done.
If you live outside the city, it depends on whether your employer requires you to work outside Philadelphia or only allows it. The city calls this its “Requirement of Employment” policy: “The compensation of non-resident employees who perform work for Philadelphia-based employers is not subject to Philadelphia Wage Tax during the time they are required to work remotely from a location outside Philadelphia, including working from home. … If an employer allows an employee to work from home, at the convenience and discretion of the employee, the employee’s compensation will be subject to Wage Tax” (Wage Tax policy guidance for non-resident employees). The city adds that this is “a long-standing policy” that it did not change during the pandemic.
The city’s own examples show where the line falls:
- Your employer requires you to work two days a week at a client’s site in Montgomery County: those days are not taxable.
- Your employer lets you work from home whenever you choose, even five days a week: all of your days are taxable, home days included.
- Your office has too few desks, so you are required to work from home: those days are not taxable.
- A written policy requires two office days, but you may come in more often: all days are taxable, because working from home is your choice.
- You work from home for childcare reasons with your manager’s approval: those days are taxable.
- You work from home as a reasonable accommodation under the ADA: those days are not taxable.
- You are assigned to the Philadelphia office on paper but work entirely from home outside the city and come in at most twice a year: you are not taxable at all. In the city’s words, “An employee must have either dedicated work space or the option to work regularly in the Philadelphia office in order to be taxable.”
For people paid a salary who work partly in the city and partly outside it, the city’s regulations tax “that portion of his compensation which the total number of working days employed within the City of Philadelphia bears to the total number of working days employed within and outside of Philadelphia.”
In practice, many employers withhold the tax on all of your pay and leave the rest to you. Non-residents who were required to work outside the city can file a Wage Tax refund petition. The city’s guidance says employees “file for a refund after the end of the tax year” with a copy of their W-2 and a letter from their employer certifying that they were required to work from home.
Is my 401(k) taxed by Philadelphia?
Yes. The city’s 2025 Earnings Tax return instructions say: “Employee Pension Plan contributions (such as 401k contributions) are subject to Earnings Tax and are not deductible from gross compensation.” Saving in a 401(k) lowers your federal income tax, but it does not lower your Philadelphia Wage Tax.
The same goes for pre-tax health, dental and vision premiums, health savings accounts and flexible spending accounts, according to a 2020 post by the city's Department of Revenue that is still on its website (marked as archived): “Employee contributions to medical and 401(k) plans offered by your employer are subject to Wage Tax.” The city’s regulations do not name these plans either way, so that post is the city’s most direct word. What your employer pays for you is different: the city lists “employer-paid health insurance premiums (uniformly provided to all employees)” among income that is not taxable.
This is one place where Philadelphia parts ways with the rest of Pennsylvania. Pennsylvania’s own income tax and the local earned income tax of other towns do not tax pre-tax health premiums. All three tax 401(k) savings.
I live in the suburbs and work in Philadelphia. Do I owe my home town’s tax too?
Usually not. Your employer takes only Philadelphia’s non-resident tax, 3.425%. Pennsylvania’s Local Tax Enabling Act says that “employees working in the City of Philadelphia shall be exempt from the provisions of this section to the extent they are subject to” the Sterling Act, the law behind the city’s tax. So the usual Act 32 rule, the higher of your home rate and your work place’s rate, does not apply to your Philadelphia pay.
Your home town’s earned income tax is settled on the annual local tax return you file with your home tax collector. DCED’s return instructions say that “wage taxes paid to Philadelphia may be taken directly against your local earned income tax liability,” but that “no credit … may exceed your total local earned income tax liability.” To get the credit you file that return with a copy of your W-2, and the instructions warn: “No refunds or credits will be allowed for any overpayment made to Philadelphia.”
Because 3.425% is higher than the resident rate of almost every town in Pennsylvania, the credit wipes out the home tax for nearly everyone, and nothing more is owed. In DCED’s register, two places have a higher resident rate: Chester City at 3.75% and Reading at 3.6%. If you live in one of them and work in Philadelphia, you owe the difference to your home collector. For a Chester resident that is 0.325% of pay, about $227 a year on a $70,000 salary. The paycheck calculator shows the amount for your pay when you choose your home town.
I live in New Jersey. Do I pay the Philadelphia Wage Tax?
Yes, at the non-resident rate. Pennsylvania and New Jersey have a reciprocal agreement, but it covers state income tax only. New Jersey’s Division of Taxation says: “The New Jersey/Pennsylvania Reciprocal Agreement does not apply to income or wage tax imposed and collected by the City of Philadelphia or any other municipality in Pennsylvania. That means a New Jersey resident who works in Philadelphia and pays city wage taxes can claim a credit for the taxes paid to Philadelphia.”
That credit is claimed on New Jersey’s Schedule NJ-COJ and has a limit: New Jersey says your credit “cannot be more than the amount you would have paid if you earned the income in New Jersey.” Philadelphia, for its part, gives non-residents no credit for taxes paid elsewhere (Earnings Tax): “Non-residents of Pennsylvania can’t claim a tax credit against Philadelphia Earnings Tax for income taxes paid to any other state or political subdivision.”
The reciprocal agreement does change your Pennsylvania income tax. A New Jersey resident who gives a Pennsylvania employer form REV-419 has no Pennsylvania income tax withheld; the employer withholds New Jersey’s tax instead.
Can I pay less if my income is low?
Yes, through a refund. Residents and non-residents who qualify for Pennsylvania’s Tax Forgiveness pay the Wage Tax at 1.5%. The city’s Wage Tax page says: “A taxpayer (residents or non-resident) with PA tax forgiveness pays Wage Tax at a reduced 1.5% rate. You’ll receive a refund for any Wage Tax above the 1.5% discounted rate.” Your employer still withholds the full rate; the lower rate comes back to you after the year.
How does this site’s calculator handle Philadelphia?
- If you live in Philadelphia, it takes the resident rate, 3.735%, wherever you work. If you only work there, it takes the non-resident rate, 3.425%.
- It works the tax out on your pay before 401(k) savings and before pre-tax health premiums, as the city’s guidance above says.
- It adds no local services tax for Philadelphia, and none for the city’s school district.
- It uses today’s rate for every paycheck in its “year” column. For 2026, paychecks dated January to June were at 3.74% and 3.43%, so the year’s total is a few dollars low.
- It cannot know which days your employer required you to work outside the city. If you are owed a refund for those days, it comes from the city after the year ends.
Questions people ask
Is the Philadelphia Wage Tax the same as the Earnings Tax?
Yes. It is one tax. It is called the Wage Tax when your employer takes it out of your pay, and the Earnings Tax when you pay it yourself, for example because your employer is outside Pennsylvania.
When does the Philadelphia Wage Tax rate change next?
On July 1, 2027, when the city’s schedule lowers it to 3.73% for residents and 3.42% for non-residents. The new rate applies to paychecks dated on or after that day.
Do Philadelphia residents pay the Wage Tax if they work outside the city?
Yes. Residents owe the resident rate on all of their pay, wherever they work. Any employer in Pennsylvania must withhold it; an employer outside Pennsylvania with no location in the state may not, and then the resident pays the Earnings Tax directly.
Is a bonus subject to the Philadelphia Wage Tax?
Yes. The city counts bonuses as compensation: its Earnings Tax instructions list “wages, commissions, tips, bonuses, severance pay, sick and/or vacation pay” among gross compensation. The bonus tax calculator works out the Wage Tax on a bonus with the other taxes.
Does Philadelphia have a local services tax?
No. DCED’s register lists no local services tax for Philadelphia, so nothing is taken for it. If you live in Philadelphia and work in another town that charges one, that town’s tax applies.
Can I get back Wage Tax withheld for days I worked outside Philadelphia?
If you are a non-resident and your employer required you to work outside the city on those days, yes. File a Wage Tax refund petition with the city after the year ends, with your W-2 and a letter from your employer. If working from home was your choice, those days stay taxable.
More calculators and guides
- Paycheck calculatorSalary to take-home pay after federal, Pennsylvania and local taxes
- Hourly paycheck calculatorHourly pay with overtime, and the overtime deduction on your W-4
- Bonus tax calculatorWhat a bonus comes to after federal, state and local taxes
- Local tax ratesEarned income tax and local services tax of every municipality
- Take-home pay tableTake-home pay for salaries from $20,000 to $300,000
- Pennsylvania local taxes, explainedAct 32, PSD codes, the higher-rate rule and the $52 tax