Key Takeaways
- The Philadelphia Wage Tax rate effective July 1, 2026, is 3.735% for residents and 3.425% for nonresidents.
- Philadelphia residents owe the Wage Tax regardless of where they work.
- Nonresidents generally owe Wage Tax on compensation for work performed in Philadelphia. Work performed outside the city may not be taxable when the remote work is required by the employer. Working remotely by choice generally remains taxable.
- Eligible nonresidents can request a Wage Tax refund for qualifying work performed outside Philadelphia, within three years of when the tax was paid or due, whichever is later.
Introduction
If you live in Philadelphia or commute into the city for work, the Philadelphia Wage Tax can affect your paycheck and annual tax filing. It is Philadelphia’s income tax on salaries, wages, commissions and other employee compensation. The rules can also matter if you work remotely, live in New Jersey, or move into or out of Philadelphia.
This guide explains the current Philadelphia city wage tax rates, who pays them, how the City’s remote-work rules apply, and how eligible taxpayers can request a refund. It also covers credits that may apply to New Jersey residents and other Philadelphia taxes on income.
Philadelphia Wage Tax Rates
The current Philadelphia Wage Tax rates took effect July 1, 2026.
| Effective period | Philadelphia resident | Philadelphia nonresident | Status |
|---|---|---|---|
| July 1, 2025 to June 30, 2026 | 3.74% | 3.43% | Previous |
| July 1, 2026 to June 30, 2027 | 3.735% | 3.425% | Current |
| From July 1, 2027 | 3.73% | 3.42% | Scheduled |
| From July 1, 2028 | 3.72% | 3.41% | Scheduled |
| From July 1, 2029 | 3.70% | 3.39% | Scheduled |
Source: City of Philadelphia tax rate history.
The City describes these reductions as part of a five-year, gradual tax-cut plan approved by Philadelphia City Council in June 2025.
Who Pays the Philadelphia Wage Tax?
Philadelphia residents who are employed owe the Wage Tax regardless of where they work. Nonresidents who work in Philadelphia also owe the tax.
The tax applies to salaries, wages, commissions, and other compensation.
What counts as taxable pay, and what does not?
The City identifies several types of income that are exempt from the Wage Tax. These include certain scholarships received as part of a degree program when no service is required, pension payments, workers’ compensation, active military pay, death benefits, employer-paid health insurance premiums when provided to all employees, witness and juror fees, sick or disability benefits, and life insurance proceeds.
The treatment of different types of income can depend on the specific circumstances. For questions about your individual filing, coordinate with your CPA.
If your employer does not withhold Philadelphia tax
Philadelphia residents with taxable wages and no Wage Tax withheld must file and pay the City’s Earnings Tax themselves. This commonly applies to residents who work for an out-of-state employer.
The annual reconciliation is due by April 15, with quarterly payments also required.
How Much Is the Philadelphia Wage Tax?
The amount depends on your Philadelphia residency status and taxable compensation.
The following examples are hypothetical and show the Wage Tax only using the rates effective July 1, 2026. They assume all salary shown is taxable at those rates.
| Hypothetical annual salary | Resident at 3.735% | Nonresident working fully in Philadelphia at 3.425% |
|---|---|---|
| $100,000 | $3,735 | $3,425 |
| $150,000 | $5,602.50 | $5,137.50 |
| $250,000 | $9,337.50 | $8,562.50 |
These examples do not represent total federal, state, or local taxes. They illustrate the Philadelphia Wage Tax only.
Remote and Hybrid Work: The Requirement of Employment Rule
Working from home does not automatically eliminate Philadelphia Wage Tax.
For Philadelphia residents, the rule is straightforward: residents owe the Wage Tax regardless of where they work.
For nonresidents working for Philadelphia-based employers, Philadelphia’s Department of Revenue uses a policy called the Requirement of Employment. The City’s guidance states that their compensation “is not subject to Philadelphia Wage Tax during the time they are required to work remotely from a location outside Philadelphia.”
If an employer allows an employee to work from home at the employee’s convenience and discretion, the compensation remains subject to Philadelphia Wage Tax. The City’s policy did not change during the COVID-19 pandemic.
When is remote work taxable?
The City’s examples help distinguish between remote work that is required and remote work that is a personal choice. These examples apply to nonresidents working outside Philadelphia.
| Taxable | Not taxable |
|---|---|
| An employee may work from home whenever the employee chooses | The employee is required to work at a client site outside Philadelphia |
| The employee has a two-day in-office minimum but may choose to come in more often | The employer requires remote work because too few workstations are available |
| An employee is permitted to work from home for childcare | Working remotely is required as an accommodation under the Americans With Disabilities Act (ADA) |
| Remote work is available by employee choice | The employer has a required medical work-from-home policy |
The examples reflect the City’s remote-work guidance.
For fully remote nonresidents, an administrative assignment to a Philadelphia office does not by itself make pay taxable. The City considers whether the employee has a dedicated workspace there or the option to work regularly in that office.
The key distinction is whether working outside Philadelphia is required by the employment arrangement or is available because the employee chooses it.
If you have a hybrid arrangement, keep your work-location records and discuss the tax treatment with your employer and CPA.
How to Get a Philadelphia Wage Tax Refund
Eligible nonresident employees may request a Wage Tax refund for qualifying work performed outside Philadelphia when their employer required them to work there. Philadelphia residents may apply for a refund for deductible, non-reimbursed business expenses.
Nonresidents who worked outside Philadelphia
If you are a nonresident who had Wage Tax withheld for qualifying work performed outside Philadelphia, you must submit signed employer certification and a dates-and-locations worksheet. The employer documentation and worksheet must match.
Refund requests can be submitted through the Philadelphia Tax Center using the Refunds panel. A username is not required to submit the refund request.
The City states that normal processing takes approximately six to eight weeks. You can check the status using the City’s Where’s My Refund service, and direct deposit is available.
The refund deadline is within three years from the date the tax was paid or due, whichever date is later.
Income-based refund
There is also an income-based refund for taxpayers who are approved for Pennsylvania tax forgiveness through PA-40 Schedule SP.
This refund can return Wage Tax paid above the 1.5% rate. The City provides an income-based Wage Tax refund petition with instructions.
The paper petition should not be completed or mailed if you do not have a PA-40 Schedule SP.
Residents with unreimbursed business expenses
Philadelphia residents may apply for a refund for deductible, non-reimbursed business expenses.
If you think you may qualify, discuss the expenses and documentation with your CPA before filing.
Live Outside the City? Credits That May Apply
Depending on where you live, Philadelphia Wage Tax may qualify for a credit on your state or local tax return.
New Jersey residents
New Jersey residents who pay Philadelphia Wage Tax should be aware that the New Jersey/Pennsylvania Reciprocal Agreement does not apply to income or wage tax imposed and collected by the City of Philadelphia.
New Jersey residents may claim a credit for Philadelphia taxes paid on their New Jersey return using Schedule NJ-COJ when New Jersey also taxes that income. The credit cannot exceed the amount of New Jersey tax that would have been charged on the same income.
If you live in New Jersey and work in Philadelphia, ask your CPA to review the credit and filing requirements.
Non-Pennsylvania residents cannot claim a tax credit against Philadelphia Earnings Tax for income taxes paid to another state or political subdivision.
Pennsylvania residents outside Philadelphia
Philadelphia is not a party to reciprocal tax agreements with other municipalities.
For Pennsylvania residents who live outside Philadelphia, local tax treatment can depend on where you live and the applicable local rules. Your Philadelphia tax may be credited against your local earned income tax in some circumstances, so check with your local tax collector.
Other Philadelphia Taxes on Income
The Philadelphia Wage Tax is not the only city tax that can apply to income.
School Income Tax: This applies to certain unearned income of Philadelphia residents. For tax year 2026, the rate is 3.735%.
Net Profits Tax: This applies to net profits from businesses operated by Philadelphia residents regardless of where they operate, as well as nonresidents conducting business in Philadelphia. Corporations are exempt. For tax year 2026, the rates are 3.735% for residents and 3.425% for nonresidents.
These taxes have different rules and should not be confused with the Wage Tax.
Planning Around the Philadelphia Wage Tax
The Wage Tax is a payroll tax, but it can still be one factor in broader financial planning.
For Philadelphia residents, suburban commuters, and New Jersey workers, several issues may deserve attention:
- Hybrid work arrangements: For nonresidents, understand whether remote work is required by the employer or available by employee choice, and maintain appropriate documentation.
- Moving into or out of Philadelphia: A change in residency can affect how the Wage Tax applies.
- New Jersey credits: NJ residents paying Philadelphia tax may need to account for the Schedule NJ-COJ credit when filing in New Jersey.
- Refund timing: If you are a nonresident and believe you paid Wage Tax for qualifying work performed outside Philadelphia, review the refund rules and three-year deadline.
- Coordination with your CPA: Tax filing and refund questions are best addressed alongside your tax professional, while a financial planner can help coordinate these issues with your broader financial plan.
A Philadelphia financial advisor at Liberty One Wealth Advisors can help you consider these issues alongside your broader financial plan, in coordination with your CPA.
FAQ
Do I pay Philly Wage Tax if I live in NJ?
Yes. New Jersey residents who work in Philadelphia generally owe Philadelphia Wage Tax on compensation for work performed in the city, at the nonresident rate of 3.425%, effective July 1, 2026. The New Jersey/Pennsylvania Reciprocal Agreement does not cover Philadelphia city tax. NJ residents may claim a credit on their New Jersey return using Schedule NJ-COJ, capped at the New Jersey tax on that income.
Is Philly tax 8%?
No. The Philadelphia Wage Tax rates effective July 1, 2026, are 3.735% for residents and 3.425% for nonresidents. These are Philadelphia Wage Tax rates on taxable compensation only. Federal and state income taxes, along with other applicable taxes, are separate.
Why is Philadelphia’s Wage Tax so high?
The Wage Tax is a major source of city revenue. Philadelphia has also adopted a five-year, gradual tax-cut plan approved by the City Council in June 2025. Under the schedule effective July 1, 2026, the resident rate is 3.735% and the nonresident rate is 3.425%, with additional reductions scheduled through July 2029.
How much is $100,000 after Philadelphia Wage Tax?
At the rates effective July 1, 2026, a hypothetical $100,000 taxable salary incurs $3,735 in Wage Tax for a resident, leaving $96,265, or $3,425 for a nonresident working fully in Philadelphia, leaving $96,575. These amounts reflect Wage Tax only and exclude other taxes and payroll deductions.
Do I owe Wage Tax when I work from home?
Philadelphia residents owe Wage Tax regardless of where they work. For nonresidents working for Philadelphia-based employers, compensation is generally not subject to Philadelphia Wage Tax during periods when they are required by their employer to work remotely outside the city. If working from home is available at the employee’s convenience, the compensation remains subject to Wage Tax.
How far back can I claim a refund?
A Philadelphia Wage Tax refund claim must be filed within three years from the date the tax was paid or due, whichever date is later. Eligible nonresidents should review the City’s documentation requirements, including signed employer certification and the dates-and-locations worksheet, before submitting a claim.
