Last Updated: April 2026
Pennsylvania has one of the most intricate local income tax systems in the United States. Under the Local Tax Enabling Act, virtually every Pennsylvania municipality (city, borough, or township) and school district can levy a separate earned income tax (EIT). These two rates — the municipal rate and the school district rate — are combined and applied to an employee's earned income. The combined rate typically ranges from 1% to 3.93%, making Pennsylvania's local tax burden significant even before considering the flat 3.07% state income tax.
Two private collection companies — Berkheimer Tax Administrator and Keystone Collections Group — administer EIT for the majority of Pennsylvania municipalities and school districts outside Philadelphia. Philadelphia, as Pennsylvania's largest city, operates its own Wage Tax system entirely separately. Understanding which collector administers your municipality and how the combined rate is split between municipal and school district levies is essential for correct filing and withholding in Pennsylvania.
Pennsylvania's EIT is levied on earned income — wages, salaries, commissions, business net profits, and other compensation. It does not apply to interest, dividends, capital gains, or pensions/retirement income. Each Pennsylvania municipality can levy up to 1% EIT, and each school district can levy up to 2% (with combined caps depending on the type of municipality). In practice, most residents pay a combined rate consisting of their municipality's portion plus their school district's portion.
Unlike Ohio's municipal tax, Pennsylvania's EIT is primarily resident-based: employees pay EIT based on where they live, not necessarily where they work (though non-residents working in certain municipalities may owe tax there too, with credits available). Employers are required to withhold EIT for their employees. Act 32 of 2008 standardized the collection system across Pennsylvania, requiring each county to designate a single Tax Collection District (TCD) and a single collector — either Berkheimer, Keystone, or another county-designated body — simplifying a system that previously had hundreds of separate collectors.
Philadelphia operates entirely outside the Act 32 framework. The city levies its own Wage Tax on all wages earned within Philadelphia. For Philadelphia residents, the 2026 rate is 3.75% on all earned income regardless of where work is performed. For non-residents working in Philadelphia, the rate is 3.44% on wages earned within city limits.
Philadelphia residents also owe Pennsylvania's 3.07% state income tax, creating a combined state + city earned income tax burden of 6.82% (resident). At $75,000 income, that's approximately $5,115 in state + city earned income tax. Adding federal tax, a Philadelphia resident earning $75,000 pays approximately $11,100 (federal) + $2,303 (PA state) + $2,813 (Philly wage) = ~$16,216 total (21.6% effective rate). Philadelphia residents are not subject to additional school district EIT since the city schools are funded through the city's tax structure.
Pittsburgh residents pay a combined EIT of 3.0%: City of Pittsburgh 2% + Pittsburgh School District 1%. This is one of the highest combined rates outside Philadelphia among Pennsylvania municipalities. Allegheny County residents outside Pittsburgh pay varying rates depending on their specific municipality and school district — most Allegheny County suburban areas have combined rates of 1% to 2%.
The Pittsburgh EIT is collected by the Jordan Tax Service, which serves Allegheny County. Pittsburgh residents also pay Pennsylvania's flat 3.07% state income tax, for a combined state + local earned income tax of 6.07%. At $100,000 income, the combined state + city EIT is approximately $6,070, plus federal income tax of approximately $17,400, for a total of about $23,470. Pittsburgh's total burden is somewhat lower than Philadelphia's but still notably higher than Pennsylvania suburbs without a 2% city levy.
Before 2012, Pennsylvania's EIT system was famously fragmented: hundreds of local tax officers and collection agencies operated independently, creating significant compliance burdens for employers with employees across multiple Pennsylvania municipalities. Act 32 of 2008, which took effect January 1, 2012, fundamentally restructured the system by requiring each county to consolidate EIT collection under a single Tax Collection District (TCD) with one designated collector.
The reform eliminated most duplicative filing requirements and standardized forms and deadlines. Under Act 32, employers file a single quarterly return and remit one combined payment to the TCD collector, who then distributes the revenue to the appropriate municipalities and school districts. For employees, Act 32 means paycheck stubs should clearly show EIT withheld, and year-end filings are standardized. The two dominant statewide collectors — Berkheimer (serving much of southeast and central PA) and Keystone Collections Group (serving much of western and northeast PA) — emerged from this consolidation as the primary administrators of the reformed system.
Pennsylvania EIT returns are due April 15 annually. Most Pennsylvania residents who have only W-2 income from Pennsylvania employers with correct withholding may not need to file a separate local return — their employer's withholding and the collector's records may suffice in some TCDs. However, self-employed individuals, those with net profits from a business, and anyone with under-withheld EIT must file a return.
If you live in a Berkheimer-administered area, file at hab-inc.com. If you are in a Keystone area, file at keystonecollects.com. Philadelphia residents file the Wage Tax reconciliation through the Philadelphia Revenue Department at revenue.phila.gov. Pennsylvania also requires employers to withhold at the employee's resident EIT rate — if you work in a different TCD than where you live, your employer should still withhold at your home TCD rate. The system continues to create confusion for workers who change jobs, move between counties, or work remotely, making professional tax advice valuable for complex PA situations.
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Get Matched with a Local CPA →Both are private companies designated by Pennsylvania counties to administer the local earned income tax under Act 32. Berkheimer (formally HAB) primarily serves municipalities in southeast Pennsylvania including Bucks, Chester, Montgomery, and other counties. Keystone Collections Group primarily serves western and northeastern Pennsylvania counties. The county in which you live determines which collector administers your EIT. Both collectors operate similar online portals for filing and payments. Philadelphia residents use neither — they deal directly with the City of Philadelphia's Revenue Department.
If you work from home in Pennsylvania, you owe EIT based on your home municipality and school district — not your employer's location. Since Act 32, earned income is taxed where it is earned (your home for remote workers). Your employer should withhold at your resident municipality's combined EIT rate. If your employer withholds based on their office location instead of your home, you may need to file for a refund from the wrong jurisdiction and pay your home TCD the correct amount. This has been a common issue since the rise of remote work in 2020.
No. Philadelphia's Wage Tax is a separate tax administered directly by the City of Philadelphia under its own authority, not under the Act 32 EIT framework. It applies to all wages earned in Philadelphia (non-residents) and all wages earned by Philadelphia residents anywhere. The EIT system under Act 32 covers the rest of Pennsylvania. The practical impact is the same — a local tax on earned income — but the legal basis, filing procedures, and administrator are entirely different. Philadelphia residents do not pay EIT in the standard Act 32 sense; they pay the Wage Tax instead.
No. Pennsylvania's local EIT applies only to earned income — wages, salaries, business net profits, and similar compensation. Retirement income including Social Security, pension distributions, 401(k) and IRA withdrawals, and investment income (interest, dividends, capital gains) are exempt from both Pennsylvania EIT and Pennsylvania state income tax. This makes Pennsylvania notably tax-friendly for retirees, with a 0% effective state income tax rate on most retirement income — even while working-age residents face the 3.07% state rate plus local EIT.
Philadelphia has historically offered a Wage Tax refund to non-resident employees who worked from home outside Philadelphia for part of the year — but only for days actually worked outside city limits, with proper employer certification. The refund process requires Form BIRT-EZ or the Wage Tax refund petition, employer documentation, and proof of remote work days. Since the pandemic, this has become more common. Non-residents should carefully track remote work days and seek employer sign-off on the certification form to maximize any refund due.
Philadelphia's Wage Tax at 3.75% (residents) is effectively the highest single local earned income tax rate. Outside Philadelphia, the highest combined EIT rates tend to be in Pittsburgh (3.0%) and in some school districts with high rates combined with maximum municipal levies, which can approach 3% in certain areas. Most Pennsylvania communities are significantly below this — the suburban Philadelphia counties (Bucks, Chester, Montgomery) typically have combined rates of 1% to 1.5%. Pennsylvania's state rate of 3.07% is applied on top of whichever local rate applies.
At equivalent income levels, NYC residents typically face a higher combined local+state income tax burden than Pennsylvania residents outside Philadelphia. NYC's city tax (3.876%) plus NY state (up to 10.9%) far exceeds even Philadelphia's Wage Tax (3.75%) plus Pennsylvania's flat 3.07% state rate. However, Philadelphia residents earning $100,000 pay approximately 6.82% in state+city earned income tax, which is comparable to many NYC income levels. For suburban Pennsylvania residents with combined EIT of 1-2%, the total state+local burden is considerably lower than NYC.