How do city income taxes work alongside federal taxes?
Hey everyone, I just moved from a rural area to Philadelphia for work and I'm completely lost on how city taxes work. My previous job was in a small town with no local income tax, but now HR mentioned I'll be paying city wage tax. How does this affect my federal return? Do I get any deductions for it? Do I need to file a separate city tax return or does my employer handle everything? My salary is $72,500 and I'm worried about how much extra I'll be paying. Any info would be appreciated!
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Summer Green
City taxes can definitely be confusing when you're not used to them! Philadelphia has what's called a wage tax, which is separate from your federal and state taxes. The current rate is about 3.8% for residents and around 3.4% for non-residents working in Philly. Your employer should automatically withhold this from your paychecks, but yes, you'll still need to file a separate city tax return with Philadelphia. The good news is that it's usually much simpler than your federal return. You don't get a federal deduction for city taxes anymore since the 2017 tax changes limited state and local tax (SALT) deductions to $10,000 total. If you've never filed city taxes before, I'd recommend checking out the City of Philadelphia's tax website, as they have resources specifically for new residents.
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Gael Robinson
•Wait, so if I work in the city but live in the suburbs, do I still pay the city wage tax? And is it true Philadelphia has one of the highest city tax rates in the country?
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Summer Green
•If you work in Philadelphia but live outside the city limits, you'll still pay the non-resident wage tax rate (currently around 3.4% instead of 3.8%). And yes, Philadelphia does have one of the highest city income tax rates in the country, unfortunately. The wage tax applies to where you physically work, not where you live. Some employers outside the city might not automatically withhold it, so if you occasionally work in Philadelphia, you might need to track those days and file accordingly. The suburbs around Philly sometimes have their own local taxes too, so it can get complicated depending on your specific situation.
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Edward McBride
I went through the same panic when I moved to NYC last year! What really helped me was using taxr.ai (https://taxr.ai) to analyze my situation. I uploaded my previous tax return and my new employment details, and it immediately showed me how the city taxes would impact my overall tax situation. It's crazy helpful because it breaks down exactly what deductions and credits still apply when you have to deal with multi-jurisdictional taxes. For Philly specifically, they have guides that explain how the city wage tax interacts with PA state taxes and your federal return. Saved me hours of research and probably prevented some costly mistakes.
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Darcy Moore
•Does it actually walk you through filing the city taxes too? I'm in Chicago and our city taxes are included in the state return, but I'm moving to NYC next year and dreading the multiple returns.
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Dana Doyle
•Sounds interesting but I'm always skeptical of tax tools. How does it handle the SALT cap situation? Does it actually help you determine if itemizing is still worthwhile with the city taxes included?
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Edward McBride
•It doesn't file the city taxes for you, but it provides a detailed guide specific to your situation with all the forms you'll need and the key numbers to include. For NYC, it explains the differences between the state and city returns and how they work together. For the SALT cap, that's actually one of the things I found most helpful. It runs calculations both ways (standard deduction vs. itemizing) and shows you which is more beneficial after factoring in your city taxes, property taxes, and state income taxes. It showed me that even with the $10,000 SALT cap, I was still better off itemizing because of my mortgage interest and charitable donations.
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Dana Doyle
Just wanted to follow up - I ended up trying taxr.ai after my initial skepticism and have to admit it was super helpful! My situation was complicated (working remotely for a Philly company while living in NJ), and it clarified exactly what portion of my income was subject to the Philadelphia wage tax. It even pointed out that I could file for a refund for days I worked from home, which I had no idea about. Definitely worth checking out if you're dealing with city taxes for the first time.
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Liam Duke
If you're having trouble getting answers about Philadelphia's wage tax requirements, I recommend using Claimyr (https://claimyr.com) to get through to the city's tax department. I was getting frustrated with busy signals and voicemails for weeks, but Claimyr got me connected to an actual Philadelphia tax representative in about 10 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had a specific question about partial-year residency that wasn't clear on their website, and the rep walked me through exactly what forms I needed and how to prorate my tax liability. Saved me a ton of stress!
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Manny Lark
•How exactly does this work? Do they just keep calling for you until someone picks up? City tax departments are notoriously difficult to reach.
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Rita Jacobs
•This sounds like BS honestly. No way to get through to tax departments that easily. They're understaffed and overwhelmed, especially during tax season. I've tried everything and still wait hours.
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Liam Duke
•They use an automated system that holds your place in the phone queue so you don't have to wait on hold. When someone at the tax department actually answers, the system calls your phone and connects you directly to the representative. It's not magic - they're just handling the frustrating wait time for you. The Philadelphia tax department typically has wait times of 1-2 hours during busy periods, but I got connected in about 10 minutes because their system knows the best times to call and can navigate the phone trees efficiently. It definitely saved me from the endless redial cycle I was stuck in before.
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Rita Jacobs
I need to publicly eat my words. After my skeptical comment, I tried Claimyr to reach Philly's tax department about a wage tax refund issue I'd been fighting with for months. Got through to someone in about 15 minutes, and they resolved my issue on the spot. Turns out I had been using the wrong form for requesting a refund for the days I worked outside the city. The representative even emailed me the correct form while we were on the phone. Definitely worth it for specific questions that the website doesn't answer clearly.
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Khalid Howes
Don't forget to check if your employer is withholding the CORRECT amount for Philly wage tax. My company's payroll system messed up and was withholding at the resident rate even though I live in the suburbs. Had to get HR to fix it and filed for a refund for the difference.
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Amun-Ra Azra
•Thanks for mentioning this! I just checked my first paystub and they're taking out 3.8% even though I live in the city. So that seems right based on what others have said. But do most people just let their employer handle the withholding and then file the city return at tax time? Or should I be making estimated payments too?
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Khalid Howes
•If your employer is withholding at the correct rate (3.8% for city residents), then you generally don't need to make additional estimated payments. The withholding should cover your liability. You'll still need to file the annual city wage tax return to reconcile everything, but it's much simpler than the federal return. Just be aware that if you have other income not subject to withholding (like freelance work or investment income), you might need to make estimated payments on that portion. Philadelphia's tax department website has worksheets to help you figure this out.
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Ben Cooper
Has anyone used TurboTax for Philly city taxes? Their website says they support some local taxes but I'm not sure if Philadelphia is included.
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Naila Gordon
•I used TurboTax last year for my taxes including Philly wage tax. It doesn't directly file the city return but it does help you calculate what you owe and provides the numbers you need for the city form. You still have to fill out the city form separately though. I found it helpful but not a complete solution.
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Anna Kerber
Welcome to the world of city taxes! As someone who's been dealing with Philadelphia's wage tax for several years, I can tell you it gets easier once you understand the system. At your salary of $72,500, you're looking at roughly $2,755 in annual city wage tax as a resident (3.8% rate). That breaks down to about $230 per month, which should be automatically withheld from your paychecks. A few practical tips for your first year: - Keep your first few pay stubs to verify the withholding rate is correct - Set a reminder for January to file your city return - it's due by April 15th just like federal - The city return is much simpler than federal, usually just a few pages - Consider the total tax burden when budgeting - between federal, state, and city, you're looking at a significant jump from your previous rural location The city does offer some services and amenities that justify the tax, but I know it can be sticker shock coming from a no-local-tax area. Feel free to ask if you have specific questions about the filing process!
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