Pennsylvania Payroll Tax Guide (2026)

The state rate is a simple 3.07%, but Pennsylvania payroll is not simple: employers also withhold 0.07% for unemployment on uncapped wages, run Act 32 local earned income tax at PSD-coded rates, deduct a Local Services Tax of up to $52, and in Philadelphia withhold 3.735% from residents.^[5]

10 min read • Reviewed by Rajanikant Patel CPA • Verified Oct 1, 2026 • Sources: PA DOR, PA L&I, IRS

Quick Facts

Pennsylvania payroll at a glance

Pennsylvania runs four payroll taxes: flat 3.07% income tax withheld from employees, employer unemployment contributions on the first $10,000, a 0.07% uncapped unemployment withholding from employees, and employer-withheld local earned income and services taxes.^[5]

State income tax withholding

3.07% flat ^[1]

UI taxable wage base

$10,000 per employee ^[5]

New employer UI rate

3.8220% ^[5]

Experienced UI rate range

1.4190%–10.3734% ^[5]

Unemployment compensation employee withholding, withheld from employee

0.07%, None ^[5]

Additional Contributions tax

0.60% ^[5]

Social Security wage base

$184,500 ^[2]

FUTA net rate

0.6% = $42 per employee ^[14]

State minimum wage

$7.25 per hour (federal floor) ^[11]

Local minimum wage ordinances

None ^[11]

UI registration trigger

Pennsylvania sets no dollar threshold for most employers. ^[5]

Exempt salary threshold

$35,568 per year ^[13]

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What changed for Pennsylvania payroll in 2026

Six items moved for Pennsylvania employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

Philadelphia Wage Tax cut 1 July UC interest factor is zero UC employee withholding 0.07% New employer rate 3.8220% UC wage base holds at 10,000 State income tax stays 3.07%

Withholding the wrong local Earned Income Tax rate: Act 32 does not let you simply use the rate where your office sits. You compare the employee’s total resident rate against the non-resident rate for the work location and withhold the higher of the two, which means the correct answer can differ for two people sitting at the same desk. Pull both PSD codes from the DCED address lookup and keep a signed Residency Certification Form for every worker.^[8]

Estimate

2026 Pennsylvania payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

Pennsylvania · 2026 rates · per employee, per calendar year

Annual gross wages ($)

Cash wages subject to payroll tax, before any withholding.

Your UI contribution rate

Your exact rate is on the Contribution Rate Notice, Form UC-657, issued no later than 31 December for the following calendar year.

Custom UI rate (%)

FUTA basis

FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $10,000–

Additional Contributions tax, on first $10,000–

Interest factor, on first $10,000–

FUTA, on first $7,000–

Social Security, 6.2%–

Medicare, 1.45%–

Employer payroll tax–

Withheld from the employee

Unemployment compensation employee withholding, 0.07%, no cap–

Social Security, 6.2%–

Medicare, 1.45%–

Additional Medicare, 0.9% over $200,000–

Withheld from employee–

True cost of employment–

Employer tax as % of wages–

Total payroll tax, both sides–

State income tax withholding is not included above: it depends on the employee’s There is no state allowance certificate. Pennsylvania withholds one flat rate with no allowances or exemptions, so employers keep the federal Form W-4 on file for identification. Form REV-419 EX, Employee’s Nonwithholding Application Certificate, is filed only when an employee claims exemption as a resident of a reciprocal state or as a qualifying military spouse. and filing status, so it cannot be estimated from gross pay alone.

Rates & Nexus

Payroll tax rates & the nexus question

Pennsylvania runs five state payroll taxes. The table below is the whole state layer for 2026.^[5]

The state payroll taxes

Tax	Paid by	2026 rate	Wage base
UI	Employer	1.4190%–10.3734%; 3.8220% new	$10,000
Additional Contributions tax	Employer	0.60%	$10,000
Interest factor	Employer	0.00%	$10,000
Unemployment compensation employee withholding	Employee	0.07%	None
Income tax withholding	Employee	3.07% flat	No limit

For 2026 an experience-based rate runs from 1.4190% to 10.3734%, and both ends already include the 9.2% surcharge and the 0.60% additional contributions tax. The surcharge is a multiplier applied to the basic rate, not 9.2% of wages. The interest factor for 2026 is 0.00%. New construction employers are assigned 10.5924% rather than 3.8220%.^[5]

Supplemental wages have their own rate. Bonuses, commissions and other supplemental payments are withheld at 3.07% when paid separately from regular wages. That is a state rate only; federal supplemental withholding is a separate 22% layer.^[1]

Who has to register

Pennsylvania sets no dollar threshold for most employers. Any business with employees who perform services subject to the PA UC Law for some portion of a day, or that elects coverage, is an employer and must register and report through UCMS.^[5] Income tax withholding is administered separately by Pennsylvania Department of Revenue, so most employers end up with two state account numbers, not one.

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

1. Localisation of service→
2. Base of operations→
3. Place of direction & control→
4. Employee’s residence

One remote employee is usually enough. A single person working from home in Pennsylvania generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

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Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.^[5]

How to register

Cross the wage threshold→
Unemployment Compensation Management System (UCMS)→
Receive account number→
Contribution Rate Notice, Form UC-657, issued no later than 31 December for the following calendar year→
File & deposit online

Deposit schedule

Frequency follows the amount withheld per quarter. Under $300 a quarter is quarterly. From 300 to $999.99 a quarter is monthly, due the 15th of the following month. From 1,000 to $4,999.99 a quarter is semi-monthly, due within three banking days. At $5,000 or more a quarter, which is $20,000 a year, deposits are semi-weekly.^[1]

Returns, reports & due dates

Form	What it is	Due
Form UC-2, Employer’s Report for Unemployment Compensation, filed with Form UC-2A, Employer’s Quarterly Report of Wages Paid to Each Employee	Quarterly unemployment return	April 30, July 31, October 31, January 31
Quarterly Withholding Return, Form PA W-3, filed through myPATH, together with Form…	Income tax withholding returns	Frequency follows the amount withheld per quarter. Under $300 a qu
Annual reconciliation	Year-end withholding reconciliation	January 31
Form 941	Federal quarterly return	Last day of the month after quarter end
Form 940	Federal unemployment, annual	January 31
New hire report	Report of newly hired employees	Within 20 days of start date

Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.^[5]

Pricing

Payroll Pricing

Simple, transparent pricing, no setup fees, no year-end surprises. One flat charge per pay run.

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Setup fee

one-time onboarding

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Every payroll run

each pay cycle

billed
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Off-cycle payroll

corrections & bonuses

billed
extra

Year-end filings

W-2s, 1099s & more

billed
extra

All you actually pay

Per employee, per pay run

$6 /emp

Plus a flat $40 minimum per pay run. That’s the whole bill.

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Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.^[5]

Subject wages

Salaries, hourly pay, overtime and piece rates
Commissions, bonuses and incentive pay
Most cash tips reported by the employee
Vacation, holiday and paid sick leave when taken as wages
Severance and payments in lieu of notice
The cash value of meals and lodging provided as compensation
Employer contributions to a non-qualified deferred compensation plan
Wages subject to the employee-paid contributions listed above

Not subject

Reimbursements of genuine business expenses under an accountable plan
Employer contributions to a qualified retirement plan
Employer-paid premiums for accident and health insurance
Most third-party sick pay after the sixth calendar month
Payments to a genuine independent contractor
Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $10,000 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base: The slice of each employee’s annual pay that unemployment tax is calculated on. In Pennsylvania that is $10,000 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Unemployment compensation employee withholding: An employee-funded contribution withheld from pay at 0.07%. It is the employee’s money, so it is withheld rather than paid by the employer, but the employer is responsible for remitting it.
Experience rating: The method Pennsylvania Department of Labor and Industry, Office of UC Tax Services uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate: The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
There is no state allowance certificate. Pennsylvania withholds one flat rate with no allowances or exemptions, so employers keep the federal Form W-4 on file for identification. Form REV-419 EX, Employee’s Nonwithholding Application Certificate, is filed only when an employee claims exemption as a resident of a reciprocal state or as a qualifying military spouse.: The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Pennsylvania Department of Revenue.
Reserve account: The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer: A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service: The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction: A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages: Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Local withholding: Income or occupational tax levied by a city, county or school district and withheld by the employer alongside state tax. It is assessed separately from the state layer.

Federal, State & Local

Pennsylvania payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

Tax	Rate	2026 base
Social Security	6.2% each side	$184,500
Medicare	1.45% each side	No limit
Additional Medicare	0.9% employee only	Over $200,000
FUTA, standard	0.6% net	$7,000
Federal income tax	Per Form W-4	No limit

Pennsylvania has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.^[14]

Layer 2: State

Tax	Rate	2026 base
UI, new employer	3.8220%	$10,000
UI, experienced	1.4190%–10.3734%	$10,000
Additional Contributions tax	0.60%	$10,000
Interest factor	0.00%	$10,000
Unemployment compensation employee withholding, employee	0.07%	No limit
Income tax, standard	3.07% flat	No limit
Income tax, supplemental	3.07%	No limit

Layer 3, county & city: a real third layer

Pennsylvania layers local wage taxes on top of the state rate. Under Act 32 employers withhold an Earned Income Tax at the higher of the employee’s resident rate and the non-resident rate for the work site, using six-digit PSD codes from the DCED address lookup and a Residency Certification Form for each worker, with quarterly filings and remittances due within 30 days of the end of each calendar quarter to the county tax officer. Employers also withhold the Local Services Tax at the work site, capped at $52 per person per calendar year across all jurisdictions, with a mandatory exemption where earned income and net profits in that jurisdiction are under $12,000 and the combined rate exceeds $10. Philadelphia sits outside Act 32 and runs its own Wage Tax.^[9]

The state minimum wage is $7.25 an hour, which is the federal floor, effective 2009-07-24. The tipped cash wage is $2.83. No local ordinance sets a higher floor. Pennsylvania has no local minimum wage in force and the state rate sits at the federal floor. The tip credit is available only for employees who receive at least $135 a month in tips, a threshold that took effect on 5 August 2022, and a tipped employee cannot spend more than 20% of weekly hours on duties that do not generate tips.^[11]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.^[13]

FAQ

Pennsylvania payroll FAQs

A flat 3.07% of compensation, for resident and non-resident employees alike. There are no brackets, allowances or exemptions in the state rate, so bonuses and other supplemental pay are withheld at the same 3.07%. Pennsylvania has reciprocal agreements with Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia.

No. The employer contribution stops after the first $10,000 of taxable wages per employee, but the 0.07% employee withholding applies to gross wages with no cap. That works out to 70 cents per $1,000 and keeps coming out all year for high earners.

A new non-construction employer is assigned 3.8220% for 2026 and a new construction employer is assigned 10.5924%, both including the 9.2% surcharge. Experience-rated employers fall between 1.4190% and 10.3734%, and those figures already include the surcharge and the 0.60% additional contributions tax.

Have each employee complete a Residency Certification Form, look up the six-digit PSD codes for the home address and the work address on the DCED lookup, then withhold the higher of the resident rate and the work-site non-resident rate. Quarterly filings and remittances go to the county tax officer within 30 days of the end of each calendar quarter.

No more than $52 per employee per calendar year in total, however many political subdivisions the person works in. The employer prorates that amount across the payroll periods it has established for the year. Where the combined rate exceeds $10, anyone whose earned income and net profits from all sources within that political subdivision are under $12,000 must be exempted.

From 1 July 2026 the rate is 3.735% for Philadelphia residents wherever they work and 3.425% for non-residents on work performed in the city. Every employer located in Pennsylvania must register with the City within 30 days of first employing someone covered by the tax. Filing runs from quarterly up to weekly depending on how much is withheld each month.

$10,000 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.

$7.25 an hour, which matches the federal floor. No local ordinance sets a higher rate. The tipped cash wage is $2.83.

April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.

Verification

Sources & methodology

Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 3 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.

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