2026 Tax Year
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Almost every Pennsylvania paycheck outside Philadelphia carries two local lines most people can't quite explain: EIT and LST. This guide breaks down what each one actually is, how Act 32's "higher of the two rates" withholding rule works, who qualifies for the LST's low-income exemption, and how they combine with Pennsylvania's flat 3.07% state tax on a real paycheck. To see your own numbers instantly, including your local rates, run them through the Pennsylvania Paycheck Calculator.
Quick answer: EIT (Earned Income Tax) is a percentage-based local tax, usually around 1% but set by each of Pennsylvania's roughly 2,500 municipalities and school districts, and it's withheld under Act 32 at whichever is higher — your home rate or your work-location rate. LST (Local Services Tax) is a completely different, flat annual fee capped at $52, charged based on where you work rather than what you earn, with an exemption for anyone earning under $12,000. Both apply on top of Pennsylvania's flat 3.07% state tax and are separate from Philadelphia's own Wage Tax system. See the Pennsylvania Paycheck Calculator for a full breakdown that includes both local taxes for your municipality.
The Earned Income Tax is Pennsylvania's local wage tax, authorized statewide under Act 32 of 2008 and collected through 69 regional Tax Collection Districts. Every municipality and overlapping school district sets its own combined rate — commonly around 1%, though some can run considerably higher.
Every worker has a resident EIT rate (where they live) and a nonresident EIT rate (where they work) — both looked up through a six-digit PSD code assigned by the state.
Employers must withhold whichever rate is higher — resident or nonresident — and remit it to the work-location tax collector, who then shares the appropriate portion with the home municipality.
Every new PA employee completes this form so the employer can identify the correct PSD codes and rates; it must be updated whenever the employee's address changes.
The Local Services Tax is a flat dollar amount — not a percentage — that a municipality and its school district can jointly charge anyone who works within their borders, capped by state law at $52 per person per year combined.
LST follows your workplace location, not your residence — the opposite emphasis from the EIT's "higher of home or work" rule.
Anyone earning less than $12,000 a year from all sources within that jurisdiction can file an LST exemption certificate with their employer and stop the withholding entirely.
Even with two jobs in two LST-levying municipalities, a worker never owes more than $52 total in a calendar year — the primary employer typically withholds it.
| Feature | EIT (Earned Income Tax) | LST (Local Services Tax) |
|---|---|---|
| Type | Percentage of wages | Flat annual fee |
| Typical rate / amount | ~1% (varies by municipality) | Up to $52/year |
| Determined by | Higher of resident or work-location rate | Work location only |
| Low-income exemption | None specific to EIT itself | Under $12,000/year, per jurisdiction |
| Withholding cap per employee | No cap — scales with income | Capped at $52 total per year, all jobs combined |
| Applies in Philadelphia? | No — replaced by the Wage Tax | No — Philadelphia doesn't levy the statewide LST |
Philadelphia sits outside the Act 32 system entirely; see our FICA vs. Philadelphia Wage Tax guide for how that city's local tax works instead. For Pennsylvania's separate flat state income tax, see our Pennsylvania state income tax guide.
Here's roughly how local taxes land on a $55,000 salary for someone who lives and works in Pennsylvania municipalities that each impose a combined 1% EIT and the maximum $52 LST — outside Philadelphia.
| Deduction | Approx. Annual Amount |
|---|---|
| Pennsylvania state tax (3.07%) | ≈ $1,689 |
| Local EIT (1%, higher of resident/work rate) | ≈ $550 |
| Local Services Tax (flat) | $52 |
| Total state + local tax | ≈ $2,291 |
Illustrative estimate only — actual EIT rates range roughly from 0.5% in some townships to well above 3% in a handful of distressed municipalities, so this is not a substitute for checking your own PSD code. Run your own salary and municipality through the Pennsylvania Paycheck Calculator for an exact figure.
New hire completes a Residency Certification Form: This gives the employer both the home and work PSD codes needed to look up the correct resident and nonresident EIT rates.
Employer withholds the higher EIT rate: If the resident rate is 1% and the work-location nonresident rate is 1.5%, the employer withholds 1.5% and remits it to the work-location tax collector, who shares the appropriate portion back to the home municipality.
LST is withheld separately, based on work location: If the combined municipal and school district LST rate exceeds $10 a year, it must be spread evenly across every pay period — about $1 a week for a $52 annual amount — rather than deducted in one lump sum.
Low earners can file for an LST exemption: Anyone expecting to earn under $12,000 in that jurisdiction for the year can submit an LST Exemption Certificate to stop the withholding up front, rather than filing for a refund later.
Self-employed workers pay both directly: Independent contractors file and pay EIT and LST themselves with the local tax collector rather than having it withheld — see our Freelancer 1099 Calculator for a self-employment estimate.
Every figure in this guide is drawn from the following official sources. Confirm your own municipality's exact rates before filing or adjusting payroll.