Get Answers Support Tax Filings & Payments State Filings General What is the difference between state income tax withholding and local income tax withholding in Form W-2? Last modified 4/3/2023 4:12:27 AM EST State income tax withholding and local income tax withholding are two types of taxes that may appear on an employee's Form W-2. State Income Tax Withholding State income tax withholding is a tax the state government levies on an employee's income. Employers must withhold a certain percentage of an employee's pay and remit it to the state on the employee's behalf. The amount of state income tax withheld is based on the employee's income and the tax rates set by the state. Local Income Tax Withholding Local income tax withholding is a tax that is levied by local governments, such as cities or counties, on an employee's income. Similar to state income tax withholding, employers must withhold a certain percentage of an employee's pay and remit it to the local government on the employee's behalf. However, not all local governments impose an income tax, so employees may not have a local tax withholding on their W-2. The amount of state and local income tax withholding that an employer withholds from an employee's pay depends on the employee's income, the number of allowances claimed on their W-4 form, and the tax rates set by the state or local government. When employees receive their Form W-2, they can use this information to complete their personal income tax return and determine whether they owe additional taxes or are entitled to a refund. Was this helpful? Yes No Related Questions I e-filed my W-2 Form, do I need to complete state reconciliation forms? How to know the state confirmation number for the W-2s I filed in TaxBandits? Can I correct the state tax withheld amount in 1099? I don't have state withholdings. Do I need to file Form 1099 with the state? Go to Home Page Need more help? Get in touch with our dedicated support team Contact Us (704) 684-4751 support@taxbandits.com Sign Up for a FREE TaxBandits Account! The Smart CPA Choice Register Now Already have an account? Sign in