The City of Philadelphia is increasing its Wage Tax rate for non-residents on July 1, 2020. The rate increase has an immediate impact on all businesses that operate in the city and have workers who live outside Philadelphia.

The new non-resident City Wage Tax rate is 3.5019% (.035019)

If your business withholds Wage Tax, all paychecks issued to non-residents with a pay date after June 30, 2020 must reflect the new rate. The rate for residents, currently 3.8712% (.038712), will remain the same after July 1.

Likewise, the City increased the non-resident Earnings Tax rate on July 1. The Earnings Tax rates in the new fiscal year are therefore 3.8712% (.038712) for residents and 3.5019% (.035019) 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 need to pay Earnings Tax to the City directly.

Philadelphia’s Net Profits Tax (NPT), which mirrors the Wage Tax, also increases for non-residents. For calendar year 2020, the NPT rates are 3.8712% (.038712) for residents and 3.5019% (.035019) for non-residents.