I know "state income tax" in W2 is the state income withholding" used for state tax return. But what will "local income tax" in W2 be used for?

The state income withholding is used not only for your state return, you can also claim it as an itemized deduction on your federal income tax return, assuming you itemize. Conversely you can also take the local tax withholding as an itemized deduction also, assuming you qualify.


See your rules for itemizing in the 1040 instructions for more information.

It's for those cities and/or counties where there is a local income tax (like NYC and Philadelphia).