Philadelphia wage tax for employers

Residence and work location set the rate

Two different tests decide whether you withhold, and which rate.

• Residents, 3.735%. An employer located in Pennsylvania must register with the Department of Revenue within 30 days and withhold from every Philadelphia resident on its payroll, wherever that person works. A resident who works entirely in Pittsburgh or from home is still covered.
• Nonresidents, 3.425%. You withhold from people who live outside the city for the services they perform in Philadelphia.

The city's employer page does not address out-of-state employers or remote work. If your company sits in New Jersey or Delaware and hires a Philadelphia resident, or a suburban employee splits time between a city office and home, the page gives no rule. Get the answer from the Department of Revenue in writing before the first payroll rather than guessing.

The rates and rules

The 2026 math for a $60,000 salary

Assume $30,000 is paid in each half of 2026, biweekly, 26 checks of $2,307.69.

The resident pays $186.00 more for the year. Pennsylvania's flat 3.07% state tax adds $1,842.00, and the 0.07% employee unemployment withholding adds $42.00. None of this is an employer cost; all of it comes out of the paycheck. Your own costs (FICA, FUTA and the 3.822% new-employer UC rate on $10,000) are on the Pennsylvania payroll tax page, and the employee cost calculator totals them.

How often you remit

Your schedule follows how much Wage Tax you withhold each month, across all employees:

• Under $350 a month: quarterly.
• $350 to $16,000 a month: monthly.
• $16,000 or more a month: semi-monthly or weekly. The city's thresholds overlap at exactly $16,000, so ask which applies if you land there.

One resident on $60,000 produces $60,000 x 3.735% / 12 = $186.75 a month, so a business with a single city resident files quarterly. Add a second resident on the same pay and you cross $350 and move to monthly. You file in the Philadelphia Tax Center. For 2026, quarterly returns are due April 30, July 31, October 31 and February 1, 2027, and the fourth-quarter return doubles as the annual reconciliation.

Mistakes that trigger city notices

• Missing the July 1 change. The rate moves every July. Confirm your software updated the table, and ask the Department of Revenue how to treat a pay period that straddles July 1, since the employer page we read does not say.
• Stale addresses. The resident rate follows where the person lives. When someone moves into or out of the city, record the date and switch rates from that point. The city page does not spell out mid-year move handling, so keep the paperwork.
• Treating Philadelphia like the rest of Pennsylvania. Philadelphia is outside Act 32. You file the Wage Tax with the city, not with a county tax collection district, and the employee's PSD code rules for the Pennsylvania local earned income tax work differently here.
• Assuming reciprocity covers the city. Pennsylvania has reciprocal agreements with New Jersey and five other states for its state income tax. The city's page lists no exemption for New Jersey commuters, so do not drop the nonresident Wage Tax on that basis.

Payroll software and the Wage Tax

Ask any payroll tool two questions: does it calculate the Wage Tax, and does it also file and pay it in the Philadelphia Tax Center, and what they charge. OnPay's pricing page says federal, state and local tax filings are included at $49 a month plus $6 per worker. SurePayroll lists local tax areas as an extra cost without a price, plus $9.99 a month for multi-state payroll. That second fee matters here, because a New Jersey commuter needs New Jersey state withholding. Gusto's $49 Simple plan is single-state; multi-state payroll starts on Plus at $80 plus $12 per person (all prices checked October 16, 2026). Compare more options in our payroll software rankings, and see how other cities tax wages in Ohio's municipal income tax and the payroll tax hub.