The City of Philadelphia reduced its Wage Tax rate on July 1, 2019. The rate decrease has an immediate impact on all businesses that operate in the city, or that employ Philadelphia residents. The new rates are:
- 3.8712% (.038712) for residents of Philadelphia
- 3.4481% (.034481) for non-residents
If your business withholds Wage Tax, all paychecks issued with a pay date after June 30, 2019 must reflect the new rates.
Likewise, the City lowered the Earnings Tax rates on July 1. The new Earnings Tax rates are 3.8712% (.038712) for residents and 3.4481% (.034481) for non-residents.
The Earnings Tax closely resembles the Wage Tax. The main difference is how the tax is collected and paid to the City of Philadelphia. Employers collect the Wage Tax from a worker’s paycheck and remit it to the City. If your employer doesn’t collect and remit the Wage Tax on your behalf, you’ll need to pay Earnings Tax to the City directly.
Philadelphia’s Net Profits Tax (NPT) and School Income Tax (SIT), which mirror the Wage Tax, also decreased. For calendar year 2019, the new NPT rates are 3.8712% (.038712) for residents and 3.4481% (.034481) for non-residents. For calendar year 2019, the new SIT rate for residents is 3.8712% (.038712). Non-residents do not file or pay SIT.
The July 1 rate decrease is part of a long-term plan to make small, yearly reductions to the City’s Wage Tax. The Wage Tax rate was 4.96% between the years 1985 and 1995.