How Much Is Philly Wage Tax and Who Is Required to Pay?

The Philadelphia Wage Tax is a local income tax imposed by the City of Philadelphia. This tax applies to earned income for individuals working or residing within the city limits. It funds essential municipal services.

Who is Subject to the Wage Tax

The tax applies to two main groups of individuals. All Philadelphia residents are subject to the tax on their earned income, regardless of where they perform their work duties. Individuals who are not residents of Philadelphia but perform work within the city limits are also subject to this tax on the income earned from those services.

For tax purposes, “earned income” broadly encompasses salaries, wages, commissions, bonuses, incentive payments, fees, and tips. It also includes the net profits derived from operating a business or profession, excluding corporations. Certain income types are exempt, including passive income (dividends, interest), pension payments, sick or disability benefits, unemployment compensation, and active military service pay.

Non-residents who work in Philadelphia are taxed on the portion of their compensation earned within the city, often based on working days. If a non-resident employee is required by their employer to work outside of Philadelphia, the wages earned for that out-of-city work may not be subject to the Philadelphia Wage Tax.

Current Wage Tax Rates

The rates for the Philadelphia Wage Tax are subject to change, typically adjusted annually. Verify the most current rates directly with the City of Philadelphia’s Department of Revenue.

As of July 1, 2025, new rates are in effect. For residents of Philadelphia, the rate is 3.74%. Non-residents who work within Philadelphia are subject to a slightly lower rate of 3.43%. These rates apply to salaries, wages, commissions, and other earned compensation.

Similarly, the Net Profits Tax, which applies to unincorporated businesses, mirrors these rates. For 2025, the Net Profits Tax rate is 3.74% for residents and 3.43% for non-residents.

Calculating Your Wage Tax Liability

Calculating your Philadelphia Wage Tax liability involves applying the appropriate tax rate to your gross taxable compensation. For employees, this generally means applying the resident or non-resident rate to your gross wages. For example, a Philadelphia resident earning $60,000 annually would have a Wage Tax liability of $2,244 ($60,000 multiplied by the 3.74% resident rate). On a weekly basis, this amounts to approximately $43.15 ($60,000 divided by 52 weeks, then multiplied by 3.74%).

For a non-resident working solely within Philadelphia and earning $60,000 annually, the liability would be $2,058 ($60,000 multiplied by the 3.43% non-resident rate). This translates to about $39.58 per week. If a non-resident works partly inside and partly outside the city, only the portion of income earned for services performed within Philadelphia is taxable. For instance, if a non-resident earns $60,000 annually but only works 60% of their time in Philadelphia, their taxable income would be $36,000 ($60,000 multiplied by 0.60), resulting in a tax liability of $1,234.80 ($36,000 multiplied by 3.43%).

Many pre-tax deductions common for federal income tax are not excluded from the Wage Tax calculation. Employee contributions to medical, dental, or vision plans (under Section 125 benefits), 401(k) deferrals, Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and pension deductions are generally still subject to the Wage Tax. However, some specific deductions may apply, such as unreimbursed employee business expenses if supported by Federal Form 2106.

How to Pay Your Wage Tax

For most employed individuals, the Philadelphia Wage Tax is typically handled through employer withholding. Employers are generally required to withhold the tax directly from employee paychecks and remit it to the city on the employee’s behalf. This obligation applies if the employer has a physical location within Pennsylvania and employs a Philadelphia resident, or if they have sufficient business activity (nexus) within Philadelphia and employ a non-resident working in the city.

If an employer is not required to withhold the tax (e.g., an out-of-state employer without a Pennsylvania presence), Philadelphia residents must directly file and pay the “Earnings Tax” themselves. Self-employed individuals, or those with net profits from a business, are subject to the Net Profits Tax and must make estimated quarterly payments directly to the city. The typical due dates for these quarterly estimated payments are April 15, June 15, September 15, and January 15 of the following year for the previous quarter.

All Wage Tax filings and payments are now primarily conducted electronically through the Philadelphia Tax Center, the city’s online portal. Paper returns are generally no longer accepted for this tax. Employers and self-employed individuals must utilize this online system for submitting payments and required tax forms. Non-residents who had tax withheld for work performed outside the city may request a refund from the City of Philadelphia, using forms on the Department of Revenue’s website. Philadelphia residents, however, are generally not eligible for such refunds based on work location, as their income is subject to the tax regardless of where they perform their duties.