Philadelphia is one of the few US cities that taxes both residents and non-residents who work in the city. The City Wage Tax has separate resident and non-resident rates and applies on top of Pennsylvania state tax and Local Earned Income Tax.
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Resident vs non-resident
Philadelphia residents pay one rate (currently around 3.75 percent on wages, verify). Non-residents working in Philadelphia pay a slightly lower rate (around 3.44 percent, verify). Both are higher than typical PA municipal LEIT rates.
Where the wage tax sits in the stack
A Philadelphia resident sees:
- Federal income tax
- Social Security 6.2 percent
- Medicare 1.45 percent
- PA state income tax (flat rate)
- Philadelphia City Wage Tax (resident rate)
Suburbs that pay Philly tax
If you live in a Pennsylvania suburb (Bucks, Montgomery, Delaware, Chester counties) and commute to a Philadelphia job, you pay the non-resident City Wage Tax on your Philadelphia-source wages. Your suburb's Local Earned Income Tax (LEIT) usually credits the Philadelphia tax.
NJ commuters
NJ residents who work in Philadelphia pay the non-resident wage tax. NJ allows a credit on its state return for tax paid to PA and Philadelphia.
Authoritative source
City of Philadelphia Department of Revenue