On a typical middle-class salary in Pennsylvania, expect roughly 25% to 30% of your gross pay to be withheld before the money reaches your bank account. That stack includes federal income tax, Social Security and Medicare, Pennsylvania’s flat 3.07% state income tax, a local earned income tax, a small Local Services Tax, and a tiny unemployment contribution. If you live or work in Philadelphia, the city wage tax adds a significant extra layer. Here is what each deduction is, how it’s calculated, and what it actually costs you.
Federal Income Tax
Federal income tax is almost always the largest line on a Pennsylvania pay stub. It’s progressive, so only the income inside each bracket is taxed at that bracket’s rate. For a single filer in 2026:
- 10% on the first $12,400 of taxable income
- 12% from $12,401 to $50,400
- 22% from $50,401 to $105,700
- 24% from $105,701 to $201,775
- 32% from $201,776 to $256,225
- 35% from $256,226 to $640,600
- 37% above $640,600
Someone earning $70,000 doesn’t pay 22% on all of it, only on the portion above $50,400.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
How much your employer actually withholds depends on what you put on your IRS Form W-4: filing status, dependents, and any additional adjustments.2Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate Skip the form and your employer treats you as a single filer with no other entries, which usually overwithholds. Claim too many adjustments and you can end up owing at tax time, possibly with an underpayment penalty.3Internal Revenue Service. Form W-4 (2026) Employee’s Withholding Certificate The W-4 is the single biggest lever you control. If you consistently owe or receive a large refund, adjusting it is the fastest way to bring per-paycheck withholding in line with your actual liability.
Social Security and Medicare
Every paycheck includes a flat FICA deduction that doesn’t scale with your tax bracket:
- Social Security: 6.2% of wages, up to $184,500 in 2026. Once year-to-date earnings cross that cap, Social Security withholding stops for the rest of the year.4Defense Finance and Accounting Service. FICA Percentages, Maximum Taxable Wages, and Maximum Tax
- Medicare: 1.45% of all wages, no cap.5Social Security Administration. What is FICA?
Combined, FICA is 7.65% of gross pay. On a $96,000 salary that’s about $612 a month. Your employer matches the full 7.65% on their side, so the total flowing to these programs is double what you see on your stub.
High earners owe an additional 0.9% Medicare surtax on wages above $200,000 for single filers, $250,000 for married filing jointly, or $125,000 for married filing separately. Employers must start withholding the extra 0.9% once your wages cross $200,000 in a year, regardless of filing status.6Internal Revenue Service. Additional Medicare Tax
Pennsylvania State Income Tax
Pennsylvania applies a flat 3.07% to virtually all taxable compensation.7Commonwealth of Pennsylvania Department of Revenue. Tax Rates No brackets. Whether you earn $30,000 or $300,000, every dollar is taxed at the same rate. Taxable compensation covers more than base salary: bonuses, commissions, incentive pay, and vacation payouts all get hit with the 3.07%. Employers withhold it from each paycheck and remit it to the Pennsylvania Department of Revenue.8Commonwealth of Pennsylvania. Nonresident Withholding
Pennsylvania Taxes Your 401(k) Contributions
This one catches new residents off guard. Federally, traditional 401(k) contributions reduce your taxable income and defer the tax until retirement. Pennsylvania doesn’t give you that break. Employee contributions to 401(k) and other qualified retirement plans count as taxable compensation for state purposes, so the 3.07% comes out now even though the IRS lets you defer.9Department of Revenue | Commonwealth of Pennsylvania. Gross Compensation
The trade-off is that qualified retirement distributions are generally not taxed again by Pennsylvania when you withdraw them. You’re paying the state tax upfront rather than later. Health and accident insurance premiums deducted through a federally qualified Section 125 cafeteria plan are excluded from PA taxable compensation, the same as their federal treatment.9Department of Revenue | Commonwealth of Pennsylvania. Gross Compensation
Local Earned Income Tax
Nearly every municipality and school district in Pennsylvania charges a local earned income tax on top of the state tax. For people moving in from states without one, this is the surprise line item.
The most common combined rate (municipality plus school district) is 1%, but some areas, particularly those designated as financially distressed, charge more. Your employer withholds the higher of your resident rate or the rate where you work. If you live somewhere with a 1% rate but commute to a city with a 1.5% rate, 1.5% comes out, and credits generally prevent double taxation when you file your local return.
When you start a job or move, you’ll typically fill out a Residency Certification Form listing your home and work PSD (Political Subdivision) codes. Wrong codes create filing headaches, so verify them.
Philadelphia Wage Tax
Philadelphia is in its own category. As of July 1, 2025, the city wage tax is 3.74% for Philadelphia residents and 3.43% for non-residents who work in the city.10City of Philadelphia. Earnings Tax (employees) That’s on top of the 3.07% state tax and federal withholding.
A Philadelphia resident earning $60,000 loses about $2,244 per year to the city wage tax alone, roughly $187 a month. Combined with state income tax, that’s 6.81% going to state and local government before federal taxes are counted. Non-residents commuting into Philadelphia pay the 3.43% rate, which still runs well above the typical 1% charged elsewhere in the state.
Lower-income Philadelphia workers who earn below certain thresholds can apply for a reduced Earnings Tax rate of 1.5%.10City of Philadelphia. Earnings Tax (employees)
Local Services Tax
The Local Services Tax is a flat fee, not a percentage, charged by municipalities and school districts that impose it. The total is capped at $52 per year no matter how many jurisdictions you work in.11PA Department of Community & Economic Development. Local Services Tax (LST) Most employers spread it across pay periods, so it shows up as roughly $1 a week.
If your total earned income within the taxing jurisdiction is less than $12,000 for the year, you can claim an exemption. For jurisdictions that levy more than $10, the exemption is mandatory. For jurisdictions at $10 or less, it’s optional. You claim it by filing an annual certificate with both the political subdivision and your employer, attaching your prior year’s pay stubs or W-2 as proof.11PA Department of Community & Economic Development. Local Services Tax (LST)
Pennsylvania Unemployment Compensation
Pennsylvania is one of the few states where employees contribute directly to the unemployment insurance fund. For 2026, the employee withholding rate is 0.07% of gross wages.12Commonwealth of Pennsylvania. Calculating Contributions, Penalties and Interest On a $50,000 salary that’s $35 for the entire year. It’s a separate line from state income tax and funds temporary benefits for workers who lose their jobs through no fault of their own.
If You Live in PA and Work in Another State
Pennsylvania has reciprocal income tax agreements with six states: Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia.13Department of Revenue. Determining Residency Under these agreements, you pay income tax only to the state where you live, not where you work.
Reciprocity isn’t automatic. If you’re a PA resident working in one of those six states, file the appropriate exemption form with your employer so the work-state stops withholding its income tax. A PA resident working in New Jersey files Form NJ-165; residents of reciprocal states working in Pennsylvania use Form REV-419. Skip the paperwork and your employer will withhold the work-state’s tax, forcing you to file a nonresident return to get it back. The agreements cover wages and salary only, so self-employment, rental, or other non-wage income in the other state may still require a nonresident return.
What It Looks Like on a Real Paycheck
Take a single filer earning $65,000 per year, living and working in a typical Pennsylvania suburb (not Philadelphia) with a 1% local earned income tax:
- Federal income tax: roughly $7,500 to $9,000 depending on W-4 elections and deductions
- Social Security: $4,030 (6.2%)
- Medicare: $942.50 (1.45%)
- PA state income tax: $1,995.50 (3.07%)
- Local earned income tax: $650 (1%)
- Local Services Tax: $52
- PA unemployment: $45.50 (0.07%)
Total deductions land somewhere between about $15,200 and $16,700, leaving net pay of roughly $48,300 to $49,800. A Philadelphia resident at the same salary loses an additional $1,700 or so to the city wage tax, bringing net pay closer to $46,600. These numbers don’t include voluntary deductions such as health insurance premiums, retirement contributions, or flexible spending accounts, each of which further reduces take-home pay.