Philadelphia Wage Tax Graphic From the Business Tax Consultants at Wouch Maloney

Philadelphia City Wage Tax and Income Tax Rates Decreasing July 1st

The City of Philadelphia’s Department of Revenue announced decreases in the Philadelphia resident wage tax for the last half of 2023. Changes have also been announced for the Business Income and Receipts Tax (BIRT).

Philadelphia Wage Tax

On July 1, 2023, Pennsylvania employers must begin withholding wage tax at the new 3.75% rate from all paychecks issued to Philadelphia residents. The previous Philadelphia resident wage tax was 3.79%.

For non-residents working within the City of Philadelphia, no change was made. The rate for non-residents working in the city remain at 3.44%.

The Wage Tax is a tax on salaries, wages, commissions, and other compensation. The tax applies to payments that a person receives from an employer in return for work or services. All employed Philadelphia residents owe the Wage Tax, regardless of where they work. Non-residents who work in Philadelphia must also pay the Wage Tax.

Philadelphia Earnings Tax

The new Earnings Tax rate for residents is 3.75% for 2023. It was previously 3.79%. The non-resident rate remains 3.44%.

You must pay the Earnings Tax if you are a:

  • Philadelphia resident with taxable income who doesn’t have the City Wage Tax withheld from your paycheck.
  • A non-resident who works in Philadelphia and doesn’t have the City Wage Tax withheld from your paycheck.

Business Income and Receipts Tax (BIRT)

The City of Philadelphia reduced the BIRT for tax year 2023. According to the June 26, 2023, press release, the net income portion of the BIRT will drop to 5.81% from its current 5.99% rate. The BIRT applies to gross receipts and taxable net income for business activities conducted in Philadelphia. The new BIRT income tax rate becomes effective for tax year 2023 for returns due and taxes owed in 2024.  The BIRT gross receipts tax rate remains the same.

The BIRT income tax rate has been gradually reduced by the City of Philadelphia during the past ten years, from 6.45% in 2013 to 5.99% in 2022.

For a complete list of all tax reductions within the City of Philadelphia for 2023, please visit their website.

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DISCLAIMER: The WM Update, WM Wednesday Wisdom, WM Daily Update, and other related communications are intended to provide general information, as of the date of this communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.