The City of Philadelphia is decreasing its Wage Tax and Earnings Tax rates for resident and non-resident taxpayers as of July 1, 2021. Here are the new rates:
- The new Wage Tax rate for residents is 3.8398%.
- The Earnings Tax rate for residents is also decreasing from 3.8712% to 3.8398%.
- For non-residents, the Wage and Earnings Tax rates will be 3.4481%.
The Wage and Earnings taxes apply to salaries, wages, commission, and other compensation. They are two sides of the same coin. The difference is how the taxes are collected and paid to the City of Philadelphia.
Your employer withholds the Wage Tax from your paycheck and remits it to the City on your behalf. The Earnings Tax is self-pay and file – if your employer doesn’t collect and pay the Wage Tax for you, you need to file and pay for yourself.
Employers must begin withholding Wage Tax at the new rate from all paychecks issued to residents and non-residents after June 30, 2021.
If your employer is not withholding Wage Tax for you, click here to register for a City Wage account number to start paying and filing your tax directly.
Net Profits Tax
Likewise, the City’s Net Profits Tax (NPT) is decreasing for residents and non-residents. The NPT is tax paid on the net profits you earn from your trade, business, profession, or other for-profit activities conducted in Philadelphia. The new NPT rates are:
- 3.8398% for residents, and
- 3.4481% for non-residents
Keep in mind that whether you earn profit or not, you must still file the NPT to avoid interests and penalties.
School Income Tax
The School Income Tax rate is also changing. As of July 1, 2021, the rate for residents will be 3.8398%.
If you are a resident of Philadelphia who receives certain types of unearned income (such as royalties, rental income), this tax applies to you. Read the School Income Tax regulations for a full list of taxable income types. Non-residents don’t pay the School Income Tax.
The City is also reducing Parking Tax from 25% to 22.50% on July 1, 2021. This change will also impact the City’s Valet Parking Tax rate. City Council approved this planned tax reduction as part of the budget package last year.