Payroll Tax in Pennsylvania: Complete Guide 2026
Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.
Payroll Tax in Pennsylvania: Complete Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
Pennsylvania’s payroll tax system features a flat state income tax rate that simplifies withholding calculations, combined with a local earned income tax (EIT) system that adds administrative complexity. Nearly all Pennsylvania municipalities impose a local EIT, typically split between the resident and work municipalities. Pennsylvania does not have state disability insurance or paid family leave mandates, keeping employer payroll costs moderate compared to northeastern neighbors like New Jersey and New York.
Pennsylvania Payroll Tax Rates (2026)
| Tax Type | Employer Rate | Employee Rate | Wage Base |
|---|---|---|---|
| PA income tax withholding | N/A | ~3.07% (flat) | All wages |
| Local earned income tax (EIT) | N/A | ~0.5% to ~3.75% (varies) | All wages |
| Federal Social Security | ~6.2% | ~6.2% | First ~$168,600 |
| Federal Medicare | ~1.45% | ~1.45% | All wages |
| Additional Medicare | N/A | ~0.9% | Over ~$200,000 |
| FUTA | ~0.6% (after credit) | N/A | First ~$7,000 |
| PA Unemployment (UC) | ~1.2905% to ~9.9333% | ~0.06% | First ~$10,000 |
How Pennsylvania Payroll Taxes Work
State Income Tax Withholding
Pennsylvania employers withhold the flat ~3.07% state income tax from all employee wages. Unlike states with graduated rates, there are no brackets, exemptions, or allowances that affect the withholding rate. Every dollar of compensation is withheld at ~3.07%, making the calculation straightforward.
Employers remit withheld taxes to the Pennsylvania Department of Revenue on a semi-monthly, monthly, or quarterly basis depending on the total amount withheld.
Local Earned Income Tax (EIT)
Pennsylvania’s local EIT is one of the most complex aspects of the state’s payroll system. Key features:
- Nearly universal: Almost all Pennsylvania municipalities impose a local EIT, typically ranging from ~0.5% to ~2.0% for most areas. Philadelphia’s wage tax is significantly higher at ~3.75% for residents.
- Split between resident and work municipalities: The total EIT rate is typically split between the employee’s resident municipality and the work municipality. The work municipality’s share is withheld by the employer and credited against the resident rate.
- Tax Collection Districts (TCDs): Pennsylvania consolidated local tax collection into ~69 Tax Collection Districts, each served by an approved tax officer. Employers remit local EIT to the appropriate TCD.
- Keystone Collections, Berkheimer, and others: Third-party tax collectors handle EIT collection for many TCDs, and employers may need to register with multiple collectors.
Common Local EIT Rates
| Locality | EIT Rate | Notes |
|---|---|---|
| Philadelphia (resident wage tax) | ~3.75% | City collects directly |
| Philadelphia (non-resident wage tax) | ~3.44% | Lower rate for commuters |
| Pittsburgh area (typical) | ~1.0% to ~2.0% | Split resident/work |
| Most PA municipalities | ~0.5% to ~1.5% | Varies widely |
| School districts | Often ~0.5% | Included in total EIT |
State Unemployment Insurance (UC)
Pennsylvania’s UC system has both employer and employee contributions:
- Employer rate: ~1.2905% to ~9.9333% on the first ~$10,000 of wages per employee, based on experience rating
- Employee rate: ~0.06% on all wages (one of the few states where employees contribute to UC)
- New employer rate: Approximately ~3.6889% to ~10.2238% depending on industry
Pennsylvania’s employee UC contribution of ~0.06% is unusual among states and is withheld from all wages (no cap).
Employer Payroll Tax Cost Summary
| Tax | Employer Cost per ~$50,000 Employee |
|---|---|
| PA income tax withholding | ~$0 (withheld from employee) |
| Local EIT withholding | ~$0 (withheld from employee) |
| Federal Social Security | ~$3,100 |
| Federal Medicare | ~$725 |
| FUTA | ~$42 |
| PA UC (at ~3.69% new employer rate) | ~$369 |
| Total employer payroll tax cost | ~$4,236 |
Comparison to Neighboring States
| State | SUTA Wage Base | Employee UC Contribution | Local Income Tax |
|---|---|---|---|
| Pennsylvania | ~$10,000 | Yes (~0.06%) | Yes (widespread EIT) |
| New Jersey | ~$42,300 | Yes (~0.3825%) | No |
| New York | ~$12,500 | No | NYC only |
| Ohio | ~$9,000 | No | Yes (~600+ cities) |
| Delaware | ~$10,500 | No | City of Wilmington only |
| Maryland | ~$8,500 | No | County income tax |
Pennsylvania and Ohio share the distinction of having extensive local income tax withholding obligations. Pennsylvania’s EIT system is somewhat simpler than Ohio’s municipal tax system due to the TCD consolidation.
Tips for Pennsylvania Employers
- Register with the correct Tax Collection District for each work location. Use the PA DCED Municipal Statistics database to identify the TCD and tax collector for each municipality where you have employees.
- Withhold EIT based on the work location and provide the employee a credit against their resident municipality rate. This requires maintaining accurate records of where each employee works.
- Handle Philadelphia separately — Philadelphia’s wage tax is collected directly by the City of Philadelphia, not through the TCD system. The resident rate (~3.75%) and non-resident rate (~3.44%) differ.
- Remember the employee UC contribution of ~0.06% — Pennsylvania is one of few states that requires employees to contribute to unemployment insurance. This must be withheld from all wages. See the self-employment tax guide for related federal obligations.
- File withholding returns on time — the PA Department of Revenue assesses penalties for late filings and deposits.
- Track remote work locations — post-pandemic, if employees work from home in a different municipality than the office, EIT withholding should reflect the actual work location.
- Consult a payroll specialist familiar with Pennsylvania’s local tax system. See find a CPA near you for help.
Key Takeaways
- Pennsylvania’s flat ~3.07% state income tax makes withholding calculations simple, but the local EIT system adds significant complexity.
- Nearly all PA municipalities impose a local EIT, typically ~0.5% to ~2.0%, with Philadelphia at ~3.75%.
- Pennsylvania employees contribute ~0.06% to unemployment insurance — unusual among states.
- Employer UC rates range from ~1.2905% to ~9.9333% on the first ~$10,000 of wages.
- The TCD system consolidates local tax collection into ~69 districts, but employers may still need multiple registrations.
- Pennsylvania does not impose state disability insurance or paid family leave payroll taxes.
Next Steps
- Federal Income Tax Guide 2026 — understand federal payroll obligations alongside Pennsylvania’s system.
- Self-Employment Tax Guide — compare payroll taxes to self-employment tax.
- State Income Tax Rates Comparison 2026 — compare PA’s employer costs.
- Find a CPA Near You — connect with a Pennsylvania payroll tax professional.