The City of Philadelphia will reduce its Wage Tax rate starting July 1, 2018. The rate change has an immediate impact on all businesses that operate in the city, or that hire Philadelphia residents. The new rates are:
- 3.8809% (.038809) for residents of Philadelphia
- 3.4567% (.034567) for non-residents
All paychecks issued by businesses with a pay date after June 30, 2018 must have Philadelphia City Wage Tax withheld at the new rates.
Likewise, the City has lowered its Earnings Tax rate starting to July 1, 2018. The new Earnings Tax rates are 3.8809% (.038809) for residents and 3.4567% (.034567) for non-residents.
The Earnings Tax is essentially the same as the Wage Tax. The main difference is how the tax is collected and paid to the City of Philadelphia. The Wage Tax is collected from an employee’s paycheck and paid to the City by an employer. When your employer does not collect the Wage Tax on your behalf, you pay Earnings Tax directly to the City.
Philadelphia’s Net Profits Tax (NPT) and School Income Tax (SIT), which mirror the Wage Tax, will also decrease. For Tax Year 2018, the new NPT rates are 3.8809% (.038809) for residents and 3.4567% (.034567) for non-residents. For Tax Year 2018, the new SIT rate for residents is 3.8809% (.038809). Only residents of Philadelphia are liable for SIT.
Photo credit: Joseph Bamat/Department of Revenue