The other exception is in Philadelphia, where there is a local surcharge totaling 2%, bringing the total sales tax rate there to 8%. As long as companies are requiring employees to work from home, they are exempt from the 3.4481% nonresident tax. “No other jurisdiction comes particularly close in levying a wage or income tax at the local level at such rates,” said Jared Walczak, a senior policy analyst for the Tax Foundation. But don’t expect big savings — for someone with a $50,000 salary, the reductions planned for fiscal year 2020 would mean about $5 less in wage taxes. Officials in Bucks, Montgomery, Chester, and Delaware Counties have lobbied to change state law so they can recoup that money, but Philadelphia officials have opposed such a change. Any paycheck that businesses issue with a pay date after June 30, 2018 must have Philadelphia City Wage Tax withheld at the new rate. The planned reductions in the five-year plan in the wage and business taxes will result in losing an estimated $136 million in revenue through fiscal year 2024, according to city spokesperson Mike Dunn. Do I include anything in "Double-taxed income while a resident of NJ"? The state's Sterling Act, passed in 1932, grants Philadelphia - Pennsylvania's only first-class city – taxing powers that its surrounding communities do not have. Who has to pay it? Those same non-resident workers are exempt from the tax when their employer requires them to … Our City's success is based on your success. Income Tax Rate: 1.5% The Wage Tax is collected from an employee’s paycheck and paid to the City by an employer. However, as a Philadelphia resident, you may request a Wage Tax refund based on deductible, unreimbursed business expenses. Once we return to normal operations, the Philadelphia Non-Resident Wage Tax and the New Jersey Tax will be restored to the status as of March 2020. The wage tax grew over time, reaching its highest rate of 4.96 percent for residents in 1985. Non-resident employees who had Wage Tax withheld during the time they were required to perform Most other municipalities in Pennsylvania have a 1 percent cap on earned income tax rates. That means a New Jersey resident who works in Philadelphia and pays city wage taxes can claim a credit for the taxes paid to Philadelphia. Download forms and instructions to use when filing City tax returns. I believe I can add it to the NJ state tax return. The tax applies to payments that a person receives from an employer in return for work or services. Center City District president Paul Levy and Gerard Sweeney, president and CEO of Brandywine Realty Trust, proposed imposing a higher tax rate for commercial properties than for residential properties, and would use it to offset lower wage and business-income and receipts taxes. The responsibility for proper tax reporting falls on the individual employee. The city first reduced it in 1995 under Mayor Ed Rendell, who said at the time that cuts were needed to make Philadelphia competitive and encourage job growth. That’s because other municipalities can’t collect income tax money from residents who work in Philadelphia. You can get the best discount of up to 50% off. The incremental cuts over the years aren’t enough. Levy and Sweeney’s plan would have required an exception to state law requiring tax rates to be uniform. The main difference is how the tax is collected and paid to the City of Philadelphia. The New Jersey/Pennsylvania Reciprocal Agreement does not apply to income or wage tax imposed and collected by the City of Philadelphia or any other municipality in Pennsylvania. Domb said he thinks tax incentives are just attempts to offer relief from the high tax burden. Councilwoman Helen Gym pushed back on those arguments at last week’s budget hearing, saying it would be unrealistic to replace the wage tax entirely by taxes on Philadelphia residents, such as the property tax. My colleagues at the Department of Revenue and I … She also paid Philadelphia wage tax. Philadelphia has the highest local wage tax in the country — and the city relies on it for about 44 percent of its annual revenue. 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