Local City Income Tax: How It Cuts Your Paycheck (2026)

What Is Local City Income Tax?

Local city income tax is an income tax levied by a unit of local government rather than the state or the federal government. The taxing body can be a city, a county, a township, a school district, or a special district. It applies to the wages you earn, and it is separate from property tax or sales tax.

Unlike federal income tax, which uses national brackets, local income tax is set by whichever jurisdiction has authority over where you live or work. Two people earning the same salary in the same state can pay very different local tax simply because they live a few miles apart.

Local jurisdictions assess the tax in one of three ways:

• Flat rate on wages: The most common method. A single percentage applies to all earned income, such as Philadelphia’s wage tax.
• Progressive rate: Higher earners pay a higher percentage. New York City uses brackets that rise with income.
• Flat dollar amount: A fixed annual charge regardless of income. Many Pennsylvania municipalities charge a Local Services Tax of around $52 a year.

The money funds local services: schools, police and fire departments, road maintenance, parks, and transit. It is the reason a city can offer services without leaning entirely on property and sales tax.

Which States and Cities Have a Local Income Tax in 2026?

Local income tax is far from universal. Roughly one-third of states authorize some form of city or county income tax. According to the Tax Foundation, more than 5,000 separate jurisdictions across 16 states impose one.

The states where local income tax shows up most often include:

• Ohio: More than 600 municipalities levy an income tax. Rates commonly run 1% to 3%.
• Pennsylvania: Earned Income Tax (EIT) is charged by most municipalities and school districts, plus a small Local Services Tax.
• Maryland: Every one of the 23 counties plus Baltimore City charges a “piggyback” income tax, ranging from 2.25% to 3.20%.
• Indiana: All 92 counties levy a local income tax, roughly 0.5% to over 3%.
• Michigan: Two dozen-plus cities tax income, including Detroit, Grand Rapids, and Flint.
• New York: New York City and Yonkers charge a resident income tax.
• Kentucky and Missouri: Several cities, including Kansas City and St. Louis, charge an earnings tax.

Washington D.C. also functions like a local taxing jurisdiction. Here is how a few high-impact cities compare for 2026:

• New York City: Resident rates of about 3.078% to 3.876%, with the top rate on income above $50,000.
• Philadelphia: About 3.74% to 3.75% for residents, about 3.43% to 3.44% for nonresidents.
• Detroit: 2.4% for residents, 1.2% for nonresidents.
• Columbus, Ohio: A flat 2.5% on wages.
• Maryland counties: 2.25% to 3.20%, depending on the county.
• Indiana counties: Roughly 0.5% to 3%, depending on the county.

If your state is not on this list, you almost certainly do not pay a local income tax. Workers in Texas, Florida, and most of the South and Mountain West see no city tax line at all.

How Local Tax Shows Up on Your Paycheck

For a lot of workers, the tricky part is just spotting it. Local tax rarely says “local city income tax” in plain words. Payroll systems use a short code or abbreviation instead, and the code varies by state.

Common pay-stub labels include:

• Local Tax or City Tax: The generic label used by many payroll providers.
• EIT: Earned Income Tax, the standard term in Pennsylvania.
• Earnings Tax: Used in Kansas City and St. Louis.
• LST or OPT: Local Services Tax (formerly Occupational Privilege Tax) in Pennsylvania, usually a flat dollar amount.
• NYC Res: New York City resident tax codes, or similar abbreviations.

Your employer withholds local tax every pay period, the same way it handles federal and state withholding. The amount goes to the local collector on your behalf, and it shows up on your year-end W-2 in boxes 18 through 20.

Because it comes out of every check, local tax quietly shrinks your take-home pay all year. If you have ever wondered why your net pay is lower than a coworker’s in another city at the same salary, local tax is often the answer. For a fuller picture of what is leaving your check, see our guide on what percentage of your paycheck goes to taxes.

The Real Paycheck Impact: Dollar Examples

A percentage is easy to shrug off, but the dollar figure tends to land harder. The examples below show the annual and per-paycheck cost of local tax at three salary levels, using a biweekly schedule (26 pay periods) and 2026 resident rates.

$50,000 Salary

• New York City (about 3.5% effective): roughly $1,750 per year, about $67 per paycheck.
• Philadelphia (3.75%): $1,875 per year, about $72 per paycheck.
• Detroit (2.4%): $1,200 per year, about $46 per paycheck.
• Columbus (2.5%): $1,250 per year, about $48 per paycheck.
• Dallas, Houston, or Miami: $0. No local income tax.

$75,000 Salary

• New York City (about 3.6% effective): roughly $2,700 per year, about $104 per paycheck.
• Philadelphia (3.75%): $2,813 per year, about $108 per paycheck.
• Detroit (2.4%): $1,800 per year, about $69 per paycheck.
• Columbus (2.5%): $1,875 per year, about $72 per paycheck.
• Dallas, Houston, or Miami: $0.

$100,000 Salary

• New York City (about 3.65% effective): roughly $3,650 per year, about $140 per paycheck.
• Philadelphia (3.75%): $3,750 per year, about $144 per paycheck.
• Detroit (2.4%): $2,400 per year, about $92 per paycheck.
• Columbus (2.5%): $2,500 per year, about $96 per paycheck.
• Dallas, Houston, or Miami: $0.

The gap is real money. A $100,000 earner in Philadelphia keeps about $3,750 less per year than the same earner in Houston, purely because of local tax. Over a decade, that adds up to more than $37,000, before counting any raises. It is worth a line in any job-offer or relocation decision.

Treat these figures as illustrative. NYC rates are progressive, so the effective rate climbs slightly with income, and a few cities offer small low-income exemptions. To see the exact number for your salary and city, run it through a state-by-state calculator rather than relying on a rough percentage.

Live in One City, Work in Another: Who Do You Pay?

This is the question that trips up the most people, and the answer is rarely “just one.” If you live in a taxing city and commute to a different taxing city, both can lay claim to part of your wages.

Resident vs. Nonresident Rates

Many cities charge two different rates: a higher one for residents and a lower one for nonresidents who only work there.

• Philadelphia: about 3.75% for residents, about 3.44% for nonresidents.
• Detroit: 2.4% for residents, 1.2% for nonresidents.

Live in the suburbs and work downtown, and you pay the nonresident rate to the work city. Live downtown, and you pay the full resident rate no matter where you work.

The “Withhold at the Higher Rate” Rule

When your home city and work city both tax income at different rates, the employer generally withholds at the higher of the two rates. Your home city then gives you a credit for the local tax already paid to the work city.

There is a catch, though. The credit is not always dollar-for-dollar. If your home city’s rate is lower than the work city’s, you usually cannot recover the difference, and the nonresident portion you paid to the work city is simply gone.

Reciprocity Agreements Do Not Shield You

Many neighboring states have reciprocity agreements that let you pay state income tax only to your home state, even if you work across the border. It is a useful simplification, but it has a limit that surprises people: reciprocity covers state income tax only.

A Kentucky resident who commutes to Cincinnati still owes Cincinnati’s local earnings tax, even though Kentucky and Ohio have a state reciprocity agreement. The agreement settles the state tax question and does nothing for the city tax. If you cross a state line for work, check the work city’s local tax rules separately. Our state comparison pages can help you see how two locations stack up.

How to Estimate Your Local Tax Bite (and Plan Around It)

Once you know local tax exists, the practical move is to put a real number on it. A rough percentage is fine for a gut check, but local tax interacts with your other withholding, so the cleanest way to see the impact is a full paycheck breakdown.

Here is how to plan around it:

• Model your actual paycheck. Enter your salary and state into Pay44 to see federal, state, FICA, and net pay broken out for all 50 states. Then layer your known local rate on top to get the full picture.
• Budget for the deduction, do not be surprised by it. Local tax comes out every pay period. Treat it as a fixed cost, the same as rent or insurance, so your monthly budget reflects net pay, not gross.
• Factor it into job offers. A $5,000 raise that comes with a move into a 3.75% local tax city is partly eaten before it arrives. Compare offers on take-home pay, not headline salary.
• Weigh it in relocation decisions. Moving from a no-tax city to a high-tax city, or vice versa, can shift your annual take-home pay by thousands. A suburb a few miles outside city limits sometimes carries a much lower rate.
• Check your W-2 against your pay stubs. Local tax appears in boxes 18 through 20. If the locality name looks wrong, fix it with payroll early so you do not owe at filing time.

Local tax is one of the few paycheck deductions you can influence by choosing where you live. Knowing the number is the first step. To explore more calculators and pay-stub guides, browse the Pay44 tools and the blog, or download the app to model your paycheck on the go.