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States with Mandatory Local Income Taxes

Last Updated: January 2026

Several states have mandatory local income taxes that employers must withhold in addition to state income tax. This page summarizes the major local tax jurisdictions and their requirements.

Overview of Local Tax States

State Local Tax Type Jurisdictions Rate Range
Indiana County income tax All 92 counties 0.50% - 3.38%
Maryland County/city income tax 23 counties + Baltimore City 2.25% - 3.30%
Ohio Municipal income tax Many cities 0.50% - 3.00%
Pennsylvania Earned Income Tax (EIT) Most municipalities 0.50% - 3.60%
Missouri City earnings tax Kansas City, St. Louis 1.00% each
New York City income tax NYC, Yonkers Varies (see below)
Kentucky Local occupational taxes Various cities/counties Varies
Alabama Local occupational taxes Various cities Varies

Indiana County Income Tax

All 92 Indiana counties impose a county income tax. The tax is withheld based on the employee's county of residence, not work location.

Key Points:

  • Mandatory for all Indiana employees
  • Based on county of residence
  • Rates updated annually (typically October 1)
  • Employee designates county on Form WH-4

Sample County Rates (2026):

County Rate County Rate
Marion (Indianapolis) 2.02% Lake 1.50%
Allen (Fort Wayne) 1.59% St. Joseph 1.75%
Hamilton 1.00% Tippecanoe 1.25%
Elkhart 2.00% Vanderburgh 1.25%

ProPay Setup: Enter county of residence for each Indiana employee. ProPay will calculate county withholding automatically.

Maryland Local Income Tax

All 23 Maryland counties and Baltimore City impose a local income tax. The tax is based on the employee's county or city of residence.

2026 Local Tax Rates:

Jurisdiction Rate Jurisdiction Rate
Allegany 3.03% Harford 3.06%
Anne Arundel 2.81% Howard 3.20%
Baltimore City 3.20% Kent 3.20%
Baltimore County 3.20% Montgomery 3.20%
Calvert 3.20% Prince George's 3.20%
Caroline 3.20% Queen Anne's 3.20%
Carroll 3.03% St. Mary's 3.20%
Cecil 2.74% Somerset 3.20%
Charles 3.03% Talbot 2.40%
Dorchester 3.30% Washington 2.95%
Frederick 2.96% Wicomico 3.20%
Garrett 2.65% Worcester 2.25%

Key Points:

  • Based on county/city of residence
  • Employee designates jurisdiction on Form MW507
  • Rates range from 2.25% to 3.30%
  • Rates may change annually

ProPay Setup: Enter county/city of residence for each Maryland employee. Local tax is calculated as a percentage of state taxable income.

Ohio Municipal Income Tax

Many Ohio cities and villages impose municipal income taxes. Unlike Indiana and Maryland, Ohio local taxes are typically based on work location, though residents may owe tax to their home municipality as well.

Key Points:

  • Based primarily on work location
  • Residents may have additional obligations to home city
  • Credit systems exist between municipalities
  • Not all municipalities have income tax

Major City Rates (2026):

City Rate City Rate
Columbus 2.50% Toledo 2.50%
Cleveland 2.50% Akron 2.50%
Cincinnati 1.80% Dayton 2.50%
Youngstown 2.75% Canton 2.50%

ProPay Setup: Enter work location city for each Ohio employee. Verify if the work location has a municipal income tax.

Pennsylvania Earned Income Tax (EIT)

Most Pennsylvania municipalities impose an Earned Income Tax (EIT). Some areas also have a Local Services Tax (LST), which is a flat annual amount.

Key Points:

  • Based on residence (resident EIT) and work location (non-resident EIT)
  • Rates split between municipality and school district
  • Total combined rates typically 0.50% to 3.60%
  • Philadelphia has its own wage tax system (separate from EIT)

Common Rate Structures:

Area Type Typical Resident Rate Typical Non-Resident Rate
Rural municipalities 0.50% - 1.50% 0.50% - 1.00%
Suburban municipalities 1.00% - 2.00% 0.50% - 1.50%
Philadelphia 3.75% (residents) 3.44% (non-residents)
Pittsburgh 3.00% 1.00%

ProPay Setup: Enter resident municipality and work municipality for each Pennsylvania employee. Use PA tax collector codes for proper withholding.

Missouri City Earnings Tax

Only Kansas City and St. Louis impose a city earnings tax in Missouri.

2026 Rates:

City Rate Applies To
Kansas City 1.00% Residents and non-residents working in city
St. Louis 1.00% Residents and non-residents working in city

Key Points:

  • Based on work location
  • Residents working outside city still owe tax
  • Non-residents working in city also subject to tax

ProPay Setup: Identify employees who work in or reside in Kansas City or St. Louis.

New York City and Yonkers

New York City and Yonkers impose local income taxes in addition to New York State tax.

New York City (2026):

Income Range (Single) Rate
Up to $12,000 3.078%
$12,000 - $25,000 3.762%
$25,000 - $50,000 3.819%
Over $50,000 3.876%

Yonkers:

  • Residents: 16.75% surcharge on New York State tax
  • Non-residents working in Yonkers: 0.50% of wages

Key Points:

  • NYC tax based on residence in the five boroughs
  • Yonkers has different rates for residents vs. non-residents working in Yonkers
  • Employee indicates NYC/Yonkers status on Form IT-2104

ProPay Setup: Identify employees who reside in NYC or Yonkers. NYC/Yonkers designation on Form IT-2104 determines withholding.

Best Practices for Local Tax Compliance

  1. Collect accurate address information - Local taxes depend on precise residence and work location
  2. Update addresses promptly - When employees move, local tax obligations may change
  3. Verify jurisdictions - Use state-provided lookup tools to confirm tax jurisdictions
  4. Monitor rate changes - Local rates can change annually or even mid-year
  5. Maintain documentation - Keep records of jurisdiction determinations

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