Local Earned Income Tax (EIT) in Pennsylvania: How It Interacts With Your PA-40

Pennsylvania taxes your paycheck twice, through two completely separate governments, using two completely separate forms — and a surprising number of people who’ve lived here their whole lives don’t realize it. There’s the state income tax you already know about, a flat 3.07% reported on Form PA-40. Then there’s a second tax, the Earned Income Tax (EIT), set by whatever municipality and school district you live in, collected by a local tax officer you’ve probably never heard of, and reconciled on a form the PA-40 instructions never mention.

This post walks through how the two layers actually work: why the state rate is the same for everyone but the local rate isn’t, how to find the number that applies to you, why the two filings stay separate even though they’re both due the same day, and why neither tax gives you a dollar-for-dollar credit against the other. If you moved, changed jobs, or picked up a new work location anytime in 2026, there’s also a practical reason to check this now rather than waiting for next spring.

Two taxes, two governments, two forms

The state layer is simple by design. Pennsylvania’s personal income tax is a flat 3.07% on taxable income, with no brackets — everyone pays the same rate regardless of income level. It’s reported annually on the PA-40, and your employer withholds it based on that single statewide rate.

The local layer is where it gets more complicated, because “local” in Pennsylvania doesn’t mean one thing. The EIT is authorized under Act 32 of 2008 and administered through 69 county-wide Tax Collection Districts (Allegheny County alone is split into four), each run by its own appointed tax officer or collection agency, with the state Department of Community and Economic Development (DCED) providing oversight. Your EIT isn’t paid to Harrisburg — it’s paid to whichever collector serves the municipality and school district where you live, and it funds those local governments directly, not the state budget.

How the EIT rate actually works

The number people usually cite is “1%,” and that’s a reasonable default — but it’s not a rule, it’s just the most common outcome of one. Under Act 511, the standard EIT cap is 1% total, typically split 0.5% to the municipality and 0.5% to the school district unless the two taxing bodies agree to divide it differently.

Rates run higher than 1% in several situations, including home rule municipalities, municipalities under Act 47 financial distress status, municipalities with distressed pension systems, districts funding open-space acquisition, and a handful of legacy authorizations from since-repealed or special-session legislation. Pittsburgh’s school district, for example, is specifically authorized to levy EIT up to 2%. The practical takeaway: never assume 1% applies to you. Look up your specific municipality and school district.

There’s also a rule for people who live in one place and work in another: you’re generally taxed at the higher of your resident-municipality rate or your work-location (non-resident) rate, per DCED guidance. That comparison happens automatically through the withholding and reconciliation process, but it’s worth understanding if your paycheck’s local tax line looks different from a coworker’s who lives across a township line.

Layer	Rate	Set by	Filed on
State income tax	Flat 3.07%	Pennsylvania (statewide)	PA-40
Local EIT	Commonly 1% total, often higher	Your municipality + school district	CLGS-32-1

Philadelphia is a completely different system

If you live or work in Philadelphia, ignore everything above about PSD codes and the 1% EIT cap — none of it applies to you. Philadelphia opted out of Act 32 entirely and runs its own Wage Tax under separate city legal authority, with no reciprocal agreements tying it to the EIT system used by the other 2,500-plus municipalities in the state. As of the rate effective July 1, 2026, Philadelphia’s Wage Tax is 3.735% for residents and 3.425% for non-residents who work in the city. The city adjusts these rates most years, so treat any number you see — including this one — as something to verify against Philadelphia’s own Department of Revenue page before you rely on it for a return.

Finding your local rate

Every municipality/school-district combination in Pennsylvania has a six-digit PSD (political subdivision) code, and DCED publishes the official register of PSD codes and associated resident/non-resident rates, updated twice a year for employer withholding purposes. Your pay stub should already show your PSD code and local tax withheld; if you’re not sure it’s correct — especially after a move or a new job — cross-check it against DCED’s Local Income Tax Information page. That page has occasionally been unreliable to load directly depending on your browser setup, so if it doesn’t render, try again or search DCED’s site directly rather than assuming no rate exists for your address.

Filing: two forms, two deadlines that happen to match

Your state PA-40 and your local EIT reconciliation are not the same filing, and they don’t get bundled together no matter how it feels on your pay stub. The local reconciliation is Form CLGS-32-1, “Taxpayer Annual Local Earned Income Tax Return,” filed directly with your local tax collector — not attached to, transmitted with, or cross-referenced against your PA-40 in any automatic way.

Both are generally due April 15 (or the next business day), which is why people assume they’re linked.
They go to different agencies: the PA-40 to the Department of Revenue, the CLGS-32-1 to your local tax officer or collection agency.
If you amend one, you have to separately amend the other. Correcting your PA-40 does not automatically update your local EIT return, and vice versa.

One added wrinkle: if you’re a PA resident who worked in a non-reciprocal state and are claiming an out-of-state tax credit, that credit gets applied first against your state PA-40 liability, and only the leftover amount, if any, can offset your local EIT. It’s a narrow scenario, but it trips up people who assume the credit flows wherever they want it to.

Why you can’t deduct one against the other

This is the part people hope works differently than it does: local EIT paid is not deductible against, or creditable toward, your state PA-40 liability, and state tax doesn’t offset your local EIT either. They are fully independent tax liabilities calculated on the same earned income.

The PA-40’s Resident Credit for Taxes Paid to Other States (Schedule PA-40 G-L) is sometimes mistaken for a mechanism that might cover this, but it explicitly excludes “political subdivisions of other states” and exists solely to prevent double taxation between Pennsylvania and other states — it has nothing to do with Pennsylvania’s own local taxes. There’s no equivalent credit running the other direction on your CLGS-32-1 either. You owe both, in full, independently.

Don’t confuse EIT with the Local Services Tax

One more local line item shows up on many pay stubs and gets lumped in with EIT by mistake: the Local Services Tax (LST). It’s not an earned-income percentage tax at all — it’s a flat per-worker tax, capped at $52 per year total across all jurisdictions where you work, with a $12,000 earned-income exemption for lower earners. If your pay stub shows two separate local deductions, one is likely EIT (a percentage of wages) and the other LST (a flat periodic amount). They’re both real, both local, and both distinct from your state tax — but they’re not the same tax and aren’t calculated the same way.

A mid-year check worth doing now

Since this isn’t filing season, the useful move right now is a withholding check, not a return. If you moved, started a new job, or picked up a new work location anywhere in 2026, pull a recent pay stub and confirm the PSD code and local tax rate match where you actually live and work today. Withholding errors on the EIT side don’t get caught by anything automatic — they just accumulate until you reconcile on the CLGS-32-1 next spring, at which point you’re either writing a bigger check than expected or waiting on a refund from a local collector instead of the state.

Frequently asked questions

Is the local EIT the same everywhere in Pennsylvania?
No. The statutory default caps combined municipal and school district EIT at 1%, but home rule municipalities, financially distressed municipalities, and certain other authorized districts can charge more — Pittsburgh’s school district, for instance, can go up to 2%. Always check your specific PSD code rather than assuming 1%.

Do I file my local EIT return with my PA-40?
No. The PA-40 goes to the PA Department of Revenue; the local EIT reconciliation (Form CLGS-32-1) goes separately to your local tax collector. They share an April 15 deadline but are not connected filings, and amending one doesn’t update the other.

Can I deduct my local EIT on my state return, or vice versa?
No. These are independent tax liabilities on the same income. The PA-40’s resident credit for taxes paid to other states specifically excludes local/political-subdivision taxes, so it doesn’t apply here.

I work in Philadelphia but live elsewhere in PA — which system applies?
Philadelphia’s Wage Tax, not the standard EIT/PSD-code system. Philadelphia never adopted Act 32 and has no reciprocal agreements with other PA municipalities, so residents working there and non-residents commuting in are both subject to Philadelphia’s own wage tax rates, which the city adjusts most years.

Related guides

This is general information, not tax advice. Local EIT rates, PSD codes, and city wage tax rates change and vary by jurisdiction — confirm your specific rate with your local tax collector, DCED, or a licensed preparer before filing.