Taxes in Philadelphia
Pennsylvania levies a real, simple, flat 3.07% state income tax (stable since 2004, among the lowest and simplest in the nation) -- but Philadelphia is the one real, major exception to how the rest of Pennsylvania handles local income tax: instead of the Act 511/Act 32 Earned Income Tax (EIT) system used almost everywhere else in the state, Philadelphia levies its own, separate Wage Tax directly, currently 3.735% for residents and 3.425% for non-residents (effective July 1, 2026, on a real multi-year reduction schedule), for a real combined resident marginal rate of approximately 6.8% this record states plainly rather than letting the low state rate alone tell the story.
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Learn morePennsylvania's Flat 3.07% State Income Tax Is Genuinely Low and Simple
Pennsylvania's state income tax has been a flat 3.07% since 2004 -- one of the lowest and simplest flat state income tax rates in the nation, with no graduated brackets to navigate. This applies uniformly to Pennsylvania residents regardless of which specific municipality they live in.
Philadelphia's Own, Separate Wage Tax -- NOT the EIT System Used Elsewhere in Pennsylvania
This is Philadelphia's single most distinctive, relocation-relevant tax fact, and this record states it precisely: unlike the rest of Pennsylvania, where most municipalities and school districts levy a combined Earned Income Tax (EIT) collected by a county Tax Collection District administrator (commonly Berkheimer or Keystone Collections Group), Philadelphia levies its own, separate Wage Tax directly on employees. As of this record's last-reviewed date (after the July 1, 2026 step-down, part of a real, City-Council-approved five-year gradual reduction plan approved June 2025), the rate runs 3.735% for residents and 3.425% for non-residents -- down from 3.75%/3.44% the prior fiscal year and 3.79% (resident) prior to July 2023, with the plan's eventual target at 3.70%/3.39%.
The Real, Combined Marginal Rate for a Philadelphia Resident
Combined with Pennsylvania's flat 3.07% state rate, a Philadelphia RESIDENT's real combined approximate marginal rate runs 6.805% (3.07% + 3.735%) -- a genuinely meaningful cost this record does not let the low state rate alone obscure. A non-resident who commutes INTO Philadelphia for work pays a real combined approximate 6.495% (3.07% + 3.425%) via the Wage Tax's non-resident rate, though their own home municipality's EIT may offer a credit or offset against this -- this record did not independently re-verify the full, current credit mechanics for every possible home-municipality scenario this pass.
A Real, Distinctively High Realty Transfer Tax on Home Purchases
As detailed further on the property-taxes and buying-a-home topic pages, Philadelphia's combined realty transfer tax (paid on a home's sale price, not its assessed value) runs 4.578% (3.578% City + 1% Commonwealth), effective July 1, 2025 -- among the highest such combined rates of any major US city, raised specifically to fund affordable-housing programs. This is a real, substantial, one-time cost distinct from the ongoing property tax rate.
Pennsylvania and Philadelphia Sales Tax
Pennsylvania's state sales tax runs 6%, with Philadelphia adding its own 2% local add-on for a combined rate of approximately 8% -- this record did not independently re-verify the current exact figure to the decimal this pass; confirm current specifics directly with the Pennsylvania Department of Revenue for a specific purchase category.
Key takeaways
- Pennsylvania's flat 3.07% state income tax (stable since 2004) is genuinely low and simple -- among the lowest flat rates in the nation.
- Philadelphia levies its own, SEPARATE Wage Tax directly -- NOT the EIT system used elsewhere in Pennsylvania -- currently 3.735% (resident) / 3.425% (non-resident) as of July 2026, on a real, City-Council-approved multi-year reduction schedule.
- A Philadelphia resident's real combined approximate marginal income-tax rate runs 6.805% (3.07% state + 3.735% Wage Tax); a non-resident commuter's runs approximately 6.495%, before any home-municipality EIT credit.
- Philadelphia's real, distinctively high 4.578% combined realty transfer tax (paid on sale price) is among the highest of any major US city -- a substantial one-time cost when buying.
- Pennsylvania/Philadelphia combined sales tax runs approximately 8% (6% state + 2% city) -- this record did not independently re-verify the exact current figure to the decimal this pass.
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