Roughly 5,000 jurisdictions across 15 states are cities with income tax obligations for the people who live or work there. Rates run from a flat 1% in Kansas City and St. Louis to nearly 3.9% at the top bracket in New York City, and a local tax bill can add hundreds or thousands of dollars a year on top of what you already owe the state and the IRS.
Which States Let Cities Tax Income
Fifteen states currently authorize some form of local income tax: Alabama, Colorado, Delaware, Indiana, Iowa, Kentucky, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, Oregon, Pennsylvania, and West Virginia.
Pennsylvania and Ohio account for the vast majority of taxing jurisdictions. Ohio has roughly 650 municipalities and 200 school districts with income taxes; Pennsylvania has over 2,500 municipalities and nearly 500 school districts levying local income or wage taxes. Together the two states are about three-quarters of all local income tax jurisdictions in the country.1Tax Foundation. Local Income Taxes in 2019
How the tax gets collected varies. Indiana counties set their own rates, but the tax is collected through the state income tax return.2Indiana Department of Revenue. Current Year Individual Tax Forms Maryland works the same way: all 23 counties and Baltimore City impose a local income tax between 2.25% and 3.30%, and the state collects it for them.3Comptroller of Maryland. Tax Guidance – Maryland Income Tax Rates and Brackets Most other states leave collection to the cities and counties, which usually means a separate local return.
Rates in Major Cities
Rates swing widely from place to place. A few of the biggest:
- New York City. A graduated tax on residents from 3.078% at the bottom to 3.876% on taxable income above $50,000 for single filers or above $90,000 for joint filers. Nonresidents who work in the city do not pay NYC’s personal income tax, though they still owe New York State tax on income earned there.4Office of the New York City Comptroller Mark Levine. The NYC Personal Income Tax Before and After the Pandemic
- Philadelphia. Residents pay 3.74% on all earned income, regardless of where they work. Nonresidents who work in Philadelphia pay 3.43%.5National Finance Center. Pennsylvania Local Income Tax Withholding
- Detroit. Residents pay 2.4%; nonresidents working in the city pay 1.2%. Corporations face a separate 2.0% rate.6City of Detroit. Income Tax Information
- Columbus, Ohio. A flat 2.5% on income earned in the city.7City of Columbus, Ohio. Tax Forms
- Kansas City, Missouri. A 1% earnings tax on residents and on anyone working within city limits.8City of Kansas City. Have You Paid Your KCMO Earnings Tax (E-Tax)?
- St. Louis, Missouri. Also 1%, on residents wherever they work and on nonresidents earning income in the city.9City of St. Louis. Individual Earnings Tax Information
- Wilmington, Delaware. A 1.25% wage tax on earned income for residents and nonresidents working in the city.10City of Wilmington. City of Wilmington Tax Rates Fiscal Year 2025
- Portland, Oregon. A flat $35 Arts Tax on every resident age 18 and older who earns at least $1,000 and whose household income exceeds the federal poverty level.11Portland.gov. Arts Tax Filing and Payment Information
Most local income taxes use a flat rate. New York City is the notable exception with its graduated brackets. State law typically caps how high a city can go, so even within one state you’ll see a range from town to town.
What Kind of Income Gets Taxed
Earned Income
The most common form is an earned income tax on salaries, wages, commissions, bonuses, and tips. Passive income like interest, dividends, capital gains, and Social Security benefits is excluded.12Pennsylvania Department of Community and Economic Development. Taxpayer Annual Local Earned Income Tax Return Instructions Pension and retirement plan distributions are generally exempt too. If your only income is Social Security and a pension, you likely owe nothing to your city’s earned income tax.
Net Profits from Self-Employment
Cities with an earned income tax often layer a net profits tax on self-employed people, partnerships, and LLCs. Philadelphia’s version applies to sole proprietors, partnerships, LLCs, and even estates or trusts conducting business in the city. Residents owe 3.74% on net profits; nonresidents doing business in Philadelphia pay 3.43%.13City of Philadelphia. Net Profits Tax The base is net profits after business expenses, not gross revenue.
School District Income Tax
Some areas add a separate school district income tax on top of the municipal one. Ohio’s school district income tax is created by voter approval and exists independently of any city-level levy.14Ohio Department of Taxation. School District Income Tax Pennsylvania school districts work similarly. You can owe a school district tax even if your city imposes no income tax of its own.
Local Services Tax
Pennsylvania municipalities also charge a Local Services Tax, a flat annual fee rather than a percentage. A typical LST is about $52 a year, collected at roughly $1 per week through employer withholding. It’s paid to the municipality where you work, not where you live, and it’s separate from the earned income tax.15Lancaster County Tax Collection Bureau. Local Services Tax Self-employed people earning more than $12,000 a year in an LST municipality pay it too.
Do You Owe as a Resident or a Nonresident
Your liability depends on two things: where you live and where you work. Residents of a taxing city owe the local tax on all their earned income, even if they commute to a job somewhere else. Nonresidents owe only on income physically earned inside the city limits. If you live in a suburb with no local tax but commute into Philadelphia or Detroit, you’ll still see the work city’s tax withheld from your paycheck.
Someone who lives in one taxing city and works in another can technically owe both. Credits and reciprocal agreements usually stop you from paying twice, but only if you file correctly to claim the offset.
Remote Work and the Convenience Rule
Remote work has scrambled the rules for millions of workers. The general principle is simple: you owe local tax where you physically perform the work. If you work from a home in a jurisdiction with no local tax, you shouldn’t owe the tax to your employer’s city just because their office sits there.
The catch is the “convenience of the employer” rule. At least seven states (Alabama, Connecticut, Delaware, Nebraska, New Jersey, New York, and Pennsylvania) apply some version of this doctrine.16Connecticut General Assembly. Convenience of the Employer Rule Under it, if you work remotely for your own convenience rather than because your employer requires it, the income is sourced to the employer’s location. A New Jersey-based employee working from home in another state, for instance, could still owe New Jersey tax on that income.17Division of Taxation. Convenience of the Employer Sourcing Rule FAQ
This is where most disputes happen. A written employer policy requiring remote work, or the absence of any office space assigned to you, strengthens the argument that the work isn’t performed at the employer’s location by choice. Keep documentation of any remote-work agreements and track the days you physically work in each jurisdiction. Without records, the taxing city’s position tends to win by default.
Avoiding Double Tax: Credits and Reciprocity
When you live in one taxing city and work in another, credits keep you from paying the full rate to both. The usual arrangement: you pay tax to the work city, typically through withholding, and your home city gives you a dollar-for-dollar credit for what you paid. If your home city’s rate is higher, you pay the difference. If the work city’s rate is higher, your home bill drops to zero, but you don’t get a refund for the overage.
Some neighboring municipalities go further with formal reciprocal agreements. Cities agree to tax people only on their residence, or they coordinate withholding so the money flows to the right place automatically. If your employer and home city are covered by one of these deals, you’ll typically file an exemption certificate with your employer so withholding goes to the correct jurisdiction. New York State provides a specific form for employees claiming exemption from withholding.18New York State Department of Taxation and Finance. Certificate of Exemption from Withholding
Without an exemption form on file, your employer will withhold under their default rules, which usually means the work location. Sorting it out later means filing in both jurisdictions and claiming the credit. Doable, but more work than getting the withholding right up front.
Filing, Deadlines, and Penalties
How you file depends on the jurisdiction. In Indiana and Maryland, local taxes ride on the state return and no separate filing is needed. In Pennsylvania and Ohio, you usually file a separate local return with the municipality or a third-party collection agency that has its own portal and deadlines.19Keystone Collections Group. Keystone Collections Group
Most local returns follow the federal April 15 deadline, but some jurisdictions set their own schedules, and quarterly estimated payments may apply if you’re self-employed or have income that isn’t withheld. Many local tax offices grant extensions to file, but an extension is not an extension to pay; interest accrues on any balance from the original deadline.
Penalties for late filing or nonpayment vary. New York State charges 0.5% of the unpaid balance per month, up to 25%.20New York State Department of Taxation and Finance. Interest and penalties Other jurisdictions add flat fees on top of percentage penalties, and municipal interest rates on unpaid balances generally run between 7% and 11% a year. Ignoring a local tax bill doesn’t make it go away. Cities pursue collection through wage garnishment, liens, and legal action.
How to Find Your Local Rate
If you’re not sure whether your city or county taxes income, start with your state’s department of revenue website. Ohio offers a “Tax Finder” tool that searches by address. Pennsylvania’s Department of Community and Economic Development keeps a lookup for local earned income tax rates by municipality.21Pennsylvania Department of Community and Economic Development. Local Income Tax Information Your employer’s payroll department should also know the rates for your work location.
Check your local tax obligations before your first paycheck lands after a move or a job change. Employer withholding catches most situations but isn’t foolproof, especially if you work in multiple jurisdictions, are self-employed, or recently relocated. A missed filing in a small municipality can quietly accumulate penalties for years, and by the time anyone notices, the interest alone can dwarf the original tax.