Pennsylvania State Income Tax Withholding
Last Updated: January 2026
Overview
Pennsylvania uses a flat tax system with one of the lowest state income tax rates in the nation. However, Pennsylvania has a mandatory local earned income tax system that significantly impacts total tax withholding obligations.
2026 Tax Rate
| Income Type | Tax Rate |
|---|---|
| All taxable compensation | 3.07% |
Pennsylvania taxes eight classes of income, with compensation (wages, salaries, tips) being the most common for payroll withholding purposes.
Deductions and Exemptions
IMPORTANT: Pennsylvania does NOT allow:
- Standard deductions
- Personal exemptions
- Itemized deductions against wage income
The 3.07% rate applies to gross compensation with very limited exclusions.
Local Earned Income Taxes
CRITICAL: Most Pennsylvania municipalities levy local earned income taxes. This is NOT optional.
How Local Taxes Work
- Resident Rate: Tax paid to municipality where employee lives
- Work Location Rate: Tax paid to municipality where employee works
- Credit System: Residents receive credit for taxes paid to work location (up to resident rate)
Major City Rates (2026)
| Municipality | Resident Rate | Non-Resident Rate |
|---|---|---|
| Philadelphia | 3.75% | 3.44% |
| Pittsburgh | 3.0% | 1.0% |
| Scranton | 3.4% | 1.0% |
| Reading | 3.6% | 1.0% |
| Allentown | 1.95% | 1.0% |
Philadelphia Wage Tax
Philadelphia's wage tax is the highest local income tax in the nation:
- Residents: 3.75%
- Non-Residents working in Philadelphia: 3.44%
School District Taxes
In addition to local earned income taxes, Pennsylvania school districts may levy:
- Earned Income Tax (EIT): Up to 0.5% additional
- Most school districts participate in the local EIT system
Special Considerations
- Form REV-419: Pennsylvania withholding is calculated using the flat 3.07% rate; no state withholding form required from employees
- Local Tax Forms: Employees must complete residency certification for local tax withholding
- Act 32: Standardized local tax collection through Tax Collection Districts (TCDs)
Reciprocal Agreements
Pennsylvania has reciprocal agreements with:
- Indiana
- Maryland
- New Jersey
- Ohio
- Virginia
- West Virginia
Effect: Residents of these states working in Pennsylvania are exempt from PA state income tax (but NOT Philadelphia wage tax).
Withholding Requirements Summary
| Tax Type | Rate | Form Required |
|---|---|---|
| State Income Tax | 3.07% | None (flat rate) |
| Philadelphia Wage Tax | 3.75% / 3.44% | Residency certification |
| Local EIT | Varies (0.5% - 3.6%) | Residency certification |