Philadelphia Remote Work Tax Guide: Can You Escape the Wage Tax by Working from Home?

Philadelphia\'s 3.807% wage tax is one of the highest local income taxes in America, and it applies to all residents regardless of where they physically work. But the rise of remote work has created new opportunities — and new confusion — about when and how the wage tax applies. Understanding the rules can save Philadelphia remote workers thousands of dollars.

The Wage Tax and Remote Work

Philadelphia residents pay the 3.807% wage tax on all earned income, whether they work in the city, in the suburbs, or from home. Non-residents working in Philadelphia pay 3.44%. If you are a Philadelphia resident working remotely for a company outside the city, you still owe the full resident rate — there is no escape for residents.

Non-Resident Remote Work Refund

If you are a non-resident whose employer is in Philadelphia but you work remotely from outside the city, you may qualify for a wage tax refund on days worked remotely. Track your remote work days meticulously and file for a refund with the Philadelphia Department of Revenue. This can save suburban workers $2,000-$5,000 annually.

Moving Just Outside City Limits

For remote workers, moving from Philadelphia to nearby Montgomery County or Delaware County drops your local tax rate from 3.807% to the non-resident rate of 3.44% — and if your employer is also outside the city, you avoid the wage tax entirely.

Pennsylvania\'s Flat Tax Advantage

Pennsylvania\'s flat 3.07% state income tax is among the lowest in the nation. Combined with the wage tax, Philadelphia residents face a combined state and local rate of nearly 7%. But for remote workers living just outside the city, the 3.07% state rate alone is very competitive — lower than most states with progressive brackets.