The “LST” line in Box 14 of your W-2 is Pennsylvania’s Local Services Tax, a flat municipal tax capped at $52 per year that your employer withheld because you worked in a Pennsylvania municipality or school district that levies it.1PA Department of Community & Economic Development. Local Services Tax (LST) When you enter it in tax preparation software, categorize it as a mandatory deductible state or local tax so it flows into your SALT deduction if you itemize.
What LST Means on Your W-2
LST stands for Local Services Tax. It’s a flat-rate tax that Pennsylvania municipalities and school districts impose on people who work inside their borders, and it maxes out at $52 per person per calendar year regardless of how many jurisdictions you work in.1PA Department of Community & Economic Development. Local Services Tax (LST) The tax follows your workplace, not your home address, so you can owe it in a municipality you commute into without living there.2State College, PA – Official Website. Local Services Tax
For the 2026 tax year, the IRS split the old Box 14 into two parts: Box 14a for miscellaneous items like local taxes, union dues, and insurance premiums, and Box 14b for tipped-occupation codes.3Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 LST appears in Box 14a with a dollar amount next to it. Some payroll systems print it as “Local Svcs Tax” or an internal code instead, but the position and the small dollar figure give it away.
Don’t mistake LST for anything in Box 19. Box 19 is for local income taxes calculated as a percentage of wages, like a city wage tax. LST is a flat charge, not an income tax, and belongs in Box 14a.
How to Categorize LST in Tax Software
When your software reaches the Box 14 screen, it will ask you to pick a category from a dropdown for each item. For LST, choose “Other mandatory deductible state or local tax.” The exact wording differs a little between programs, but that’s the option you want.
Avoid the generic “Other — not on above list” choice. Selecting it (or picking the wrong category) can cause the program to leave the amount out of your SALT deduction calculation. Choosing the deductible-tax category tells the software to include LST alongside your state income tax and property tax totals.
Who Owes LST and How Much
Anyone working in a Pennsylvania municipality or school district that has enacted the tax owes it, whether you’re a W-2 employee or self-employed.2State College, PA – Official Website. Local Services Tax Employers withhold it in small increments across the year and send it to the local tax collector. The combined rate from all taxing bodies in one area can’t exceed $52 per person per year, and each municipality sets its own share of that total.
If you hold more than one job, the employer who pays you first in the calendar year handles the full withholding.4City of Pittsburgh. Local Services Tax (LST) FAQ You still can’t owe more than $52 across all jobs and all municipalities. If two employers both withheld LST, you can request a refund for the overpayment from the local tax collection bureau in the municipality where you work.
Self-employed workers pay directly rather than through withholding. When the combined LST rate in a jurisdiction exceeds $10, self-employed filers pay quarterly, within 30 days after each calendar quarter ends, to the municipality or its designated tax collector.1PA Department of Community & Economic Development. Local Services Tax (LST)
A few other states use similar workplace-based occupational taxes under different names, but the LST label on a W-2 specifically points to Pennsylvania.
Low-Income Exemption
If you expect your total income from all sources to be under $12,000 for the year, you may qualify to skip the LST.5Pennsylvania General Assembly. Act 7 of 2007 – Local Tax Enabling Act To stop withholding, file an exemption certificate with your employer, ideally before the first paycheck of the year. Deadlines vary by employer, so file early.
The exemption doesn’t roll over. You have to submit a new form each year even if you qualified the year before. If LST was already withheld before you filed, or if you realized mid-year that you qualified, request the refund through the local tax collection bureau in the municipality where you work rather than through your employer.
Deducting LST on Your Federal Return
If you itemize on Schedule A, LST counts toward your state and local tax deduction. Federal law allows a deduction for state and local taxes paid in connection with earning income, and LST qualifies because it’s a mandatory local tax imposed as a condition of working in the jurisdiction.6Office of the Law Revision Counsel. 26 U.S. Code 164 – Taxes
For the 2026 tax year, the SALT deduction cap is $40,400 for single filers and married couples filing jointly, and $20,200 for married filing separately. That reflects the $40,000 base cap set by the One Big Beautiful Bill Act in 2025 with the 1 percent adjustment the statute requires for 2026.7Internal Revenue Service. How to Update Withholding to Account for Tax Law Changes for 2025 The cap phases down for taxpayers with modified adjusted gross income above roughly $505,000 ($252,500 if married filing separately), with the fully phased-down floor at $10,000.
Fifty-two dollars won’t shift your return on its own, but it stacks with your state income tax and property tax totals. If you’re near the line where itemizing beats the standard deduction, categorizing the LST correctly in Box 14a keeps it from being dropped as an unclassified item.