Key figures
Pennsylvania payroll
2026, with sources
State payroll: simple
The state layer is light. Pennsylvania withholds a flat 3.07% income tax and runs unemployment compensation on just the first $10,000 of each employee’s wages. A new non-construction employer’s 2026 rate is 3.822%, which already includes the 9.2% solvency surcharge; employees also have 0.07% withheld for UC on all wages, with no cap. There is no state paid leave or disability program, and the minimum wage is the federal $7.25.
Pennsylvania has reciprocal agreements with Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia; a resident of one of them who files Form REV-419 has home-state tax withheld instead of Pennsylvania’s.
Local taxes: Act 32 and the LST
The complexity is local. Almost every municipality and school district levies an earned income tax, collected under Act 32 by county-based tax collection districts. For each employee the employer compares the total resident rate where the employee lives with the nonresident rate where they work, withholds the higher, and remits it to the collector for the work location. Each new employee completes a Residency Certification Form with PSD codes from DCED’s lookup. Most jurisdictions also levy the Local Services Tax, capped at $52 a year per person and withheld per pay period.
An example: a startup’s first Pennsylvania hire works from home in a Pittsburgh suburb. The home office is the worksite, so the company registers with that county’s EIT collector, withholds the higher of the two local rates and the LST, and files quarterly and annual local reconciliations, on top of state withholding and UC.
Philadelphia
Philadelphia sits outside Act 32 and collects its own Wage Tax: from July 1, 2026, 3.735% for residents and 3.425% for nonresidents working in the city. Returns are quarterly through the Philadelphia Tax Center, and payments follow a schedule set by how much is withheld. A Philadelphia resident working for the company anywhere in Pennsylvania owes the resident rate.
Deadlines
- Within 20 days of hireReport each new hire through PA CareerLink
- 30 days after each quarterLocal earned income tax and LST to the workplace collector
- QuarterlyPhiladelphia Wage Tax returns
The federal baseline
This page covers what Pennsylvania adds. The federal rules underneath it apply here too.
Common questions
Our only Pennsylvania employee works from home. Is there local tax?
Yes. Under Act 32, an employer with a worksite in Pennsylvania, and the home of a remote employee counts as one, withholds local earned income tax at the higher of the employee’s resident rate and the work location’s nonresident rate, plus the Local Services Tax of up to $52 a year, and remits them to the collector for the work location within 30 days after each quarter. DCED’s lookup gives the PSD codes and rates.
Our Pennsylvania employee lives in New Jersey. Which state do we withhold for?
Not if they file Form REV-419. Pennsylvania has reciprocal agreements with Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia: a resident of one of those states working in Pennsylvania who files the certificate has their home state’s tax withheld instead. Local earned income tax and Philadelphia Wage Tax still apply.
Is there a Pennsylvania paid leave payroll tax?
No state-run program. Pennsylvania has no state paid family leave or disability insurance payroll deduction. Philadelphia and Pittsburgh have their own paid sick leave ordinances for employees working in those cities.
Payroll next door
- DEDelaware payrollDelaware payroll means withholding, unemployment insurance on the first $14,500 of wages, and, from 10 employees, Delaware Paid Leave. Wilmington adds a 1.25% wage tax.
- MDMaryland payrollMaryland payroll withholds state and county income tax, pays unemployment on the first $8,500, and adds FAMLI contributions of 0.9% from January 1, 2027. Montgomery and Howard counties set their own minimum wages.
- NJNew Jersey payrollNew Jersey runs its own disability and family leave insurance through payroll: in 2026 employees pay 0.19% TDI and 0.23% FLI up to $171,100, and the UI wage base is $44,800. Jersey City and Newark add a 1% employer payroll tax.
- NYNew York payrollNew York payroll is state and city at once: one NYS-45 for withholding and UI, a disability and Paid Family Leave policy you buy from a carrier, the MCTMT in the commuter district, and NYC’s own leave law.
- OHOhio payrollOhio payroll carries state, city and school district income taxes, UI on the first $9,000 plus a 0.15% fee for 2026, and no state paid leave program.
- WVWest Virginia payrollWest Virginia payroll withholds 2.11% to 4.58%, pays unemployment on the first $9,500, and has short timelines: new hires and contractors reported within 14 days, wages at least twice a month.
How Pennsylvania compares
- No tax on wagesStates with no state income tax on wagesPennsylvania: withholds state income tax. 9 of 51 states are on the list.
- Paid leave payrollStates with a paid leave or disability payroll programPennsylvania: no state program. 16 of 51 states are on the list.
- Local payroll taxStates with city, county or district payroll taxesPennsylvania: city, county or district taxes on wages. 14 of 51 states are on the list.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the Pennsylvania guide
- AccountingAccounting and state tax in PennsylvaniaCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in PennsylvaniaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in PennsylvaniaPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- ComplianceCompliance and filings in PennsylvaniaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in PennsylvaniaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.