Pennsylvania Local Earned Income Tax: How the EIT Works in 2026

The Basics

What Is the Pennsylvania Local Earned Income Tax?

The Pennsylvania local earned income tax (EIT) is a residence-based tax on wages, salaries, tips, and net business profits collected by municipalities and school districts. Its legal authority comes from the Local Tax Enabling Act, passed as Act 511 in 1965. Municipalities and school districts outside Philadelphia may levy the tax. The total resident rate is the sum of the municipal rate and the school district rate.

Act 32 of 2008 rewrote how the tax is collected. Since January 1, 2012, Pennsylvania has been organized into 69 Tax Collection Districts, one per county except Allegheny (four districts) and Philadelphia (exempt from Act 32). Each district's Tax Collection Committee appoints a Tax Officer that receives the EIT for that district.

The EIT is separate from the Pennsylvania Personal Income Tax, which is a flat 3.07% state rate paid to Harrisburg. The EIT goes to your city or borough and school district and funds local services and public schools.

Who Owes

Who Must Pay Pennsylvania Local EIT?

Two rules control who owes Pennsylvania local EIT. First, the tax is based on domicile, meaning the place you consider your permanent home. Residents of a taxing municipality owe the total resident rate on all earned income, no matter where the work is physically performed. A resident of Bethlehem who commutes to a job in Wilmington still owes Bethlehem EIT on those wages.

Second, nonresidents who work inside a Pennsylvania municipality outside their home taxing district may owe a nonresident work location rate on wages earned in that place of employment. Under Act 32, the employer withholds at the higher of the employee resident rate or the work location nonresident rate, so most Pennsylvania workers see only one EIT line on their pay stub.

Some income is not earned income for EIT purposes. Interest, dividends, capital gains, Social Security, unemployment compensation, active duty military pay, clergy housing allowances, and pension distributions are excluded. Act 6 of 2016 exempts wages paid for active duty military service inside or outside Pennsylvania. Farmers also exclude gains from selling livestock or farm machinery under a special carve-out.

Rate Range

What Rates Apply Across Pennsylvania?

Total resident EIT rates across Pennsylvania cluster around 1.0%. The Local Tax Enabling Act limits the tax to a combined 1.0%, and when both a municipality and its school district levy it, that limit is shared 50/50 unless the two agree otherwise.

A smaller group of jurisdictions charges more. Municipalities declared financially distressed under Act 47 can exceed the limit as part of a recovery plan. Home rule charter municipalities are no longer confined to the statutory limits on taxes levied on residents.

Voter-approved increases under Act 50 and Act 24, open space taxes and distressed pension systems are the other exceptions. Because the employer withholds at the higher of the two rates, most commuters end up paying either their home rate or the work rate, whichever is greater, rather than both stacked on top of each other.

Where to Look Up

How Do You Find Your Current EIT Rate?

Rates change when a municipality or school district passes a new ordinance. The Pennsylvania Department of Community and Economic Development (DCED) publishes the official list of PSD Codes and EIT rates for every taxing jurisdiction in the state, updated as ordinances take effect. Employers, employees, and preparers should confirm the current rate before every filing rather than relying on last year figure.

A PSD Code is a six-digit political subdivision code. The first four digits together identify the school district. All six identify the specific municipality. You need both the resident PSD Code and the work location PSD Code on your Residency Certification Form before a Pennsylvania employer can withhold correctly.

The DCED Municipal Statistics site offers an address lookup that returns both codes and rates for any Pennsylvania address. Local tax officers such as Berkheimer and Keystone Collections Group publish the same information on their own sites for the districts they serve. Always confirm the rate on the DCED official tool before making a filing or withholding decision.

Employer Withholding

How Does Employer Withholding Work Under Act 32?

Every Pennsylvania employer with a worksite in the Commonwealth must register with the Tax Officer for the Tax Collection District where the worksite is located. On hire, the employer collects a Residency Certification Form that carries the employee home address, home PSD Code and rate, work address, work PSD Code and rate, and a signature.

Payroll then withholds the higher of the two rates from each paycheck. If the resident rate is 1.5% and the nonresident work location rate is 1.0%, the employer withholds 1.5% and remits it to the work location Tax Officer, which redirects the money to the employee home district. This higher of two rates rule is what keeps the process simple for the employee.

Employers must remit collections quarterly, on or before the last day of the month following each quarter. Under Section 512 of Act 32, an employer with worksites in more than one tax collection district may elect to report all local income tax withheld to one Tax Officer. Late payments bear interest at the rate the Commonwealth charges on delinquent state taxes, plus a penalty of 1% of the delinquent tax for each month it remains unpaid.

1.0% Resident Total Rate: $60,000 Earner

Sample calculation using the standard Act 511 split of 0.5% municipal plus 0.5% school district

Filing the Return

When and How Do You File the Annual EIT Return?

Every Pennsylvania resident with earned income or net profits must file an annual local EIT return by April 15, matching the federal deadline. The return goes to the resident Tax Officer for the Tax Collection District where the taxpayer lives, not to Harrisburg. Filing is required even when your employer withheld the correct amount and even if you expect no refund.

Forms differ by collector. Taxpayers may also use the Annual Local Earned Income Tax Return form published by DCED. Most collectors accept online filing. Overpayments bear interest unless the refund is paid within 75 days after the return due date or the date the return is filed, whichever is later.

Part year residents prorate by time in the taxing district. The formula is total year income divided by the number of months or days in the year multiplied by months or days spent in each jurisdiction. Spouses may not combine their income on a joint return, but they may file separately on the same annual return form.

Philadelphia Rule

Does Philadelphia Fit Into the Local EIT System?

Philadelphia is the one Pennsylvania city outside the Act 32 system. Rather than a resident municipal rate plus a school district rate, the City of Philadelphia levies a single Wage Tax administered by the Philadelphia Department of Revenue. The Wage Tax applies to all earned income of city residents, no matter where the work is done, and to nonresidents on income earned for work physically performed inside city limits.

Philadelphia sets its own rate through City Council ordinance. Philadelphia Wage Tax rates change on July 1; from July 1, 2026, the resident rate is 3.735% and the nonresident rate is 3.425%.

Employees who work in Philadelphia are covered by the city's Wage Tax under the Sterling Act instead of Act 32 withholding.

Remote and Moving

How Do Remote Work and Moving Affect EIT?

Pennsylvania EIT tracks domicile, so remote work usually does not change the resident rate you owe. A resident of Lower Merion Township who moves to full remote work for a Manhattan employer still owes Lower Merion resident EIT on all earned income. The employer may not be required to withhold, in which case the employee makes quarterly estimated payments to the resident Tax Officer.

Nonresident work location liability depends on where the work is physically performed. If a New Jersey resident who once commuted to King of Prussia now works from home in New Jersey full time, the King of Prussia nonresident EIT no longer applies because the work is no longer performed inside the taxing municipality.

Moving mid year triggers a proration. Report the old address dates and the new address dates on your annual return, and each Tax Officer will apply their rate to the wages earned during your months of residency. Update the Residency Certification Form with your employer the day you move so future withholding matches the new PSD Code. This is general information, not tax advice.