The City of Philadelphia has once again reduced its wage tax rates, with the new rates taking effect July 1, 2026.
The updated rates are:
- Philadelphia residents: 3.735%
- Philadelphia nonresidents: 3.425%
Any paycheck issued after June 30, 2026, should have the Philadelphia Wage Tax withheld using the updated resident or nonresident rate, as applicable.
The City has also updated its earnings tax rates to match the new wage tax rates. These reductions are part of Philadelphia’s five-year gradual tax-cut plan.
As a reminder, the net profits tax and school income tax follow the same rate-reduction schedule, but those changes don’t take effect until January 1, 2027.
What to Do Now
For taxes that apply to you or your employees, take a moment to review your payroll withholding setup and confirm the correct rates are being applied. Doing so now can help you avoid withholding errors and related payroll issues down the line.
If you have questions about how these changes affect your payroll, please contact us. We’re happy to help.