New Springfield Township Earned Income Tax Takes Effect July 1

In April 2026, the Springfield Township Board of Commissioners passed an ordinance implementing a 1% earned income tax, effective July 1, 2026. Springfield businesses and residents have begun receiving letters from Keystone Collections Group, the designated local tax collector for Delaware County, outlining their responsibilities for collecting and paying the tax.

What This Means for Businesses

Businesses located in Springfield have already been withholding local earned income tax for employees who reside in a jurisdiction with a local earned income tax, or in Philadelphia. Beginning July 1, Springfield businesses must withhold the tax for all employees, including those who live in a location with no local earned income tax.

Pennsylvania businesses are required to withhold local tax for all employees at the greater of the rate where the employee works or where the employee lives. Before the tax takes effect, businesses should:

• Consult with their payroll provider to confirm proper withholding will begin July 1
• Have all employees complete a Residency Certification Form so the correct tax rate can be determined

What This Means for Individuals

For employees who work for an employer with a Pennsylvania presence, withholding for the Springfield earned income tax should happen automatically. If a Springfield resident was already having earned income tax withheld because they worked in a location with its own tax, they may not see any difference in their net pay. Any changes happen behind the scenes with their employer.

Springfield residents who were not previously having a local earned income tax withheld should check with their employer before July 1 to confirm withholding will begin. It should happen automatically through a company's payroll provider, but often it does not, especially at small businesses that process their own payroll and larger businesses headquartered outside of Pennsylvania.

What Income Is Taxed

The local earned income tax applies mainly to wages (W-2 income) and self-employment income earned as a sole proprietor or partner in a partnership.

Generally not subject to the tax:

• Typical pensions and IRA or 401(k) withdrawals
• Social Security
• Interest, dividends, and capital gains
• Passthrough income from an S corporation
• Unemployment compensation

Note that early retirement plan distributions and certain non-qualifying plans may be taxable.

Deductions and Exceptions

The Local Tax Enabling Act allows taxpayers to reduce earned income subject to the tax for unreimbursed employee expenses, mirroring the deduction allowed on the Pennsylvania return.

Profits from a sole proprietorship or partnership are subject to the tax. Losses from one business can offset profits from another, but net losses cannot offset wages, and one spouse's loss cannot offset the other's income.

There are no exceptions or age limitations. Students and retired individuals who work part-time jobs are subject to the tax on their earned income.

Credits and Payments

Any earned income tax withheld and reflected on a W-2 will be applied against the tax due. Taxpayers may need to make estimated payments if they have earned income from a sole proprietorship or partnership, or if they work in a state such as New Jersey, Delaware, New York, or Maryland, where the employer does not withhold local tax on wages.

Philadelphia city wage tax takes precedence over local tax and will always be withheld for Springfield residents working in the city. The city wage tax, along with net profits tax, can be used as a credit against the 1% earned income tax. Any excess will not be refunded, but it can be applied against other earned income under the "Super Credit" rules.

Springfield residents who work out of state may also have an opportunity to claim a credit against the local earned income tax.

Filing Requirements

All Springfield residents must file an annual local earned income tax return, alongside their federal and state returns, typically due April 15. The local return reconciles all sources of earned income, calculates the tax, and reflects all withholding, estimated payments, and credits. It can be filed on paper or through the Keystone Collections Group website.

Taxpayers must file even if they have only W-2 employment and the withholding matches the tax due exactly.

Questions? We Can Help

Pennsylvania local earned income tax can be complex, especially for taxpayers with earned income beyond regular employment or who work in other states. Brinker Simpson & Company can assist with local earned income tax planning and return preparation, or answer any questions you have. Reach out to schedule an appointment.