Quick Answer
Local income tax is an additional tax imposed by cities or counties on earned income. NYC charges 3.078-3.876% based on income level, while Philadelphia charges a flat 3.8712%. These taxes are withheld from your paycheck automatically if you work in the city, even if you live elsewhere.
Best Answer
Sarah Chen, CPA
Best for employees working in cities with local income taxes
What is local income tax?
Local income tax is an additional tax imposed by cities, counties, or school districts on income earned within their boundaries. Unlike state income tax, local tax is typically based on where you work, not where you live. If you work in a city with local income tax, it's automatically withheld from your paycheck.
This tax is separate from and in addition to federal and state income taxes. Your total tax burden includes all three levels: federal, state, and local.
Major cities with local income taxes
Here are the largest local income tax rates for 2026:
Example: Working in NYC
Let's say you earn $75,000 working in Manhattan:
Annual taxes:
Biweekly paycheck impact:
The NYC tax alone costs you $105 per paycheck or $2,736 annually.
Philadelphia's wage tax system
Philadelphia has one of the highest local tax rates at 3.8712% for 2026. Unlike NYC's progressive system, Philly charges a flat rate on all income.
Example: $60,000 salary in Philadelphia:
Work vs. residence rules
Local income tax typically follows where you work, not where you live:
If you work in NYC but live in New Jersey:
If you live in NYC but work in New Jersey:
Remote work complications
The COVID-19 pandemic created new questions about local tax obligations for remote workers. Some cities (like NYC) continue to tax remote workers if their employer is based in the city, while others don't. Check with your employer's payroll department about your specific situation.
What you should do
Review your pay stub to identify local tax withholdings. Look for lines like "NYC Tax," "Local Tax," or abbreviations like "PHILA" for Philadelphia.
Key actions:
1. Verify correct withholding: Use our paycheck calculator to ensure proper amounts
2. Understand your filing obligations: You may need to file local returns
3. Plan for tax credits: Your home state may give credits for local taxes paid elsewhere
4. Consider residency planning: If you're mobile, factor local taxes into job and housing decisions
Key takeaway: Local income taxes can add 1-4% to your total tax burden and are typically withheld automatically based on work location, with NYC and Philadelphia having some of the highest rates nationwide.
*Sources: [IRS Publication 15](https://www.irs.gov/pub/irs-pdf/p15.pdf), [NYC Department of Finance](https://www1.nyc.gov/site/finance/taxes/business-income-tax.page)*
Key Takeaway: Local income taxes can add 1-4% to your total tax burden and are typically withheld automatically based on work location, with NYC and Philadelphia having some of the highest rates nationwide.
Major US cities with local income taxes
| City | Tax Rate | Type | Annual Cost on $75k Salary |
|---|---|---|---|
| NYC | 3.078%-3.876% | Progressive | $2,736 |
| Philadelphia | 3.8712% | Flat | $2,903 |
| Detroit | 2.4% | Flat | $1,800 |
| Cleveland | 2.5% | Flat | $1,875 |
| St. Louis | 1.0% | Flat | $750 |
More Perspectives
Sarah Chen, CPA
Best for remote employees dealing with complex local tax situations across jurisdictions
Remote work and local taxes
As a remote worker, local income tax rules become particularly complex. Some cities continue to tax you based on your employer's location, while others tax based on where you physically perform the work.
NYC's "convenience rule"
New York City (and State) have a "convenience rule" — if your employer is based in NYC and you work remotely for your own convenience (not employer requirement), you may still owe NYC taxes. This affects many remote workers nationwide.
Example: You live in Florida and work remotely for a NYC-based company earning $80,000:
Documentation requirements
To avoid local taxes as a remote worker, you typically need:
Multi-state complications
Some remote workers face taxes in multiple jurisdictions:
Strategy: Keep detailed records of work location, employer policies, and any local tax withholdings to properly file returns and claim appropriate credits.
Key takeaway: Remote workers may face local income taxes based on employer location even when working from home, particularly with NYC's aggressive "convenience rule" enforcement.
Key Takeaway: Remote workers may face local income taxes based on employer location even when working from home, particularly with NYC's aggressive "convenience rule" enforcement.
Sarah Chen, CPA
Best for those who moved into or out of cities with local income taxes
Local tax obligations when moving
Moving into or out of a city with local income tax creates part-year obligations and potential filing requirements in multiple jurisdictions.
Example: Moving to NYC mid-year
You moved to NYC in July and started a job there earning $70,000 annually ($35,000 for the 6 months):
Withholding adjustments
When you move to a city with local income tax, your employer should automatically adjust withholdings. However, verify this happens:
Moving away from high-tax cities
If you move away from a city like NYC or Philadelphia:
Strategic timing
If you're planning a move involving local taxes:
Key takeaway: Moving into or out of cities with local income taxes creates part-year filing obligations and requires immediate payroll withholding adjustments to avoid over or under-payment.
Key Takeaway: Moving into or out of cities with local income taxes creates part-year filing obligations and requires immediate payroll withholding adjustments to avoid over or under-payment.
Sources
- IRS Publication 15 — Employer's Tax Guide
- NYC Department of Finance — New York City Tax Information
Related Questions
Reviewed by Sarah Chen, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.