How Much Gets Taken Out of My Paycheck in PA?

The gross pay on your employment offer is rarely the amount that appears in your bank account on payday. Your employer withholds several mandatory taxes and other deductions before you receive your wages, significantly reducing your final take-home pay. This breakdown covers the federal, state, and local deductions Pennsylvania employees see on their pay stubs.

Mandatory Federal Deductions

Every employee in Pennsylvania is subject to mandatory deductions required by the federal government. These deductions are not unique to Pennsylvania but apply to workers nationwide. The primary federal deduction is for income tax, which is a progressive tax, meaning that higher levels of income are taxed at progressively higher rates. The specific amount withheld is determined by the information you provide on Form W-4, the Employee’s Withholding Certificate.

The Form W-4 is a document you complete when you start a new job. It instructs your employer on how much federal income tax to withhold. Key pieces of information on this form include your filing status, the number of dependents you claim, and any other adjustments for additional income or deductions. Making accurate selections on your W-4 is important for ensuring the correct amount of tax is withheld.

Beyond income tax, your paycheck is also subject to FICA taxes, an acronym for the Federal Insurance Contributions Act. FICA is a payroll tax that funds Social Security and Medicare. For 2024, the Social Security tax rate is 6.2% on all earnings up to an annual wage base limit of $168,600. Once your year-to-date earnings exceed this cap, you will no longer have Social Security tax withheld for the remainder of the year.

The second component of FICA is the Medicare tax, which has a flat rate of 1.45% with no wage limit. An additional Medicare tax of 0.9% applies to earnings above a certain threshold—$200,000 for single filers. Your employer is responsible for withholding these FICA taxes from your pay and contributing a matching amount on your behalf.

Pennsylvania State Income Tax

Unlike the federal government’s progressive tax system, Pennsylvania has a simpler structure for its state income tax. The state levies a flat tax, meaning every taxpayer pays the same rate regardless of their income level. For the 2024 tax year, Pennsylvania’s personal income tax rate is 3.07%.

This flat-rate system makes calculating the state tax portion of your paycheck withholding relatively straightforward. Pennsylvania’s tax system does not offer personal exemptions or a standard deduction similar to the federal system. This means the 3.07% rate is applied to your income without these initial reductions.

The tax applies to eight specific classes of income, including compensation, interest, dividends, and net profits from a business. For Pennsylvania employees, this flat tax is a predictable deduction from each paycheck.

Pennsylvania Local Taxes

A distinct aspect of payroll deductions in Pennsylvania is the presence of local taxes, which vary depending on where you live and work. The most prominent of these is the Local Earned Income Tax (EIT), a percentage-based tax levied on earned income like wages and commissions. This tax is in addition to the state income tax, and the specific EIT rate is a combination of the rates set by your local municipality and school district.

These rates can range from 1% in many areas to over 3% in larger cities. Employers are required to withhold the EIT and must know both the employee’s home address and work location to apply the correct rate, often withholding at the higher of the two rates if they differ. You can find your specific EIT rate using the address lookup tool on the Pennsylvania Department of Community and Economic Development (DCED) website.

In addition to the EIT, many municipalities impose a Local Services Tax (LST). The LST is a flat-dollar-amount tax, typically $52 per year, levied on individuals who work within a specific municipality’s borders. This tax helps fund local services like police, fire protection, and road maintenance. Employers usually withhold the LST on a per-pay-period basis.

A key feature of the LST is its low-income exemption. If you work in a municipality that levies an LST, you are exempt from the tax if your total earned income from all sources within that jurisdiction is less than $12,000 for the year. To claim this, you must file an LST Exemption Certificate with your employer. If you fail to file the form but your annual earnings remain below the threshold, you can file for a refund from the local tax collector.

Common Voluntary and Other Deductions

Beyond government-mandated taxes, your paycheck can also be reduced by a variety of voluntary deductions you elect to have taken out. These deductions are often for benefits offered by your employer and can be categorized as either pre-tax or post-tax. Understanding the difference is important as it affects your total tax liability.

Pre-tax deductions are subtracted from your gross pay before income and FICA taxes are calculated. This process lowers your overall taxable income, which reduces the amount of tax you owe. Common examples include:

• Premiums for employer-sponsored health, dental, and vision insurance
• Contributions to retirement savings plans like a traditional 401(k) or 403(b)
• Funds directed to a Health Savings Account (HSA)
• Funds for a Flexible Spending Account (FSA)

Conversely, post-tax deductions are taken from your pay after all mandatory taxes have been withheld. These deductions reduce your net pay but do not lower your taxable income. Examples include:

• Contributions to a Roth 401(k) plan
• Premiums for certain disability insurance policies
• Union dues
• Wage garnishments for debts like child support or unpaid taxes

Calculating Your Pennsylvania Net Pay

To determine your net, or take-home, pay, you must subtract all deductions from your gross earnings in a specific order. The calculation begins with your gross pay for the pay period. First, subtract any pre-tax voluntary deductions, which lowers your taxable income.

Next, you calculate and subtract all applicable taxes from this adjusted taxable income. This includes federal, FICA, state, and local taxes. After these percentage-based taxes are removed, you then subtract any flat-rate deductions, such as the Local Services Tax (LST).

The final step is to subtract any post-tax deductions. The remaining amount is your net pay. For instance, if your gross bi-weekly pay is $2,000 and you have $150 in pre-tax deductions, your taxable income becomes $1,850. All percentage-based taxes will be calculated on that lower amount before post-tax items are removed.