Nearly 5,000 different jurisdictions in 17 states have some form of local income taxes. In Ohio, a large number of cities (almost 600) and school districts (almost 200) impose a local income tax, and in Pennsylvania, nearly 3,000 municipalities and school districts combined have some form of local income tax. While this type of tax is more common in the Rust Belt states, all counties in Maryland and Indiana now have a local income tax, as well as some school districts in Michigan and Iowa.
Do you owe local income tax?
Depending on where you are, the tax rates vary, and some taxes change on a regular basis. In fact, some local taxes may be temporary and designed to raise funds for specific purposes, while others are permanent and help fund the city’s operating budget. Some taxes are limited and are either not reported as local income taxes or account for less than 0.01 percent of an employee’s personal income. Most local taxes range from around 1 percent up to around 3.2 percent, but most do not exceed that amount.