Pennsylvania State Income Tax for Individuals

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Pennsylvania has a unique system of taxing individual income. Residents pay Pennsylvania state income tax at a flat rate of 3.07%. All Pennsylvanians pay 3.07%, no matter how much income they have. This is different from the progressive tax system used by the federal government, in which your income is taxed at a higher rate as you earn more.

Pennsylvania doesn't offer a standard deduction or a deduction for personal exemptions—dollar amounts that you can claim for yourself, your spouse, and your dependents. This makes the state's allowed deductions, credits, and exclusions from income even more important.

Pennsylvania will forgive your tax debt, bringing your tax bill to zero if your income is low enough.

Key Takeaways

  • Pennsylvania state income tax is 3.07%, no matter your income.
  • Some types of income are exempt from Pennsylvania state income tax, including capital gains, child support, alimony, and worker's compensation.
  • Some deductions are allowed for contributions to educational savings accounts and medical or health savings accounts.

What Income Is Taxable in Pennsylvania?

Pennsylvania assesses tax on the eight classes of income:

  • Compensation
  • Interest
  • Dividends
  • Net profits from a business, profession, or farm
  • Net gains from the dispositions of property
  • Net gains from rents, royalties, patents, and copyrights
  • Income from estates or trusts
  • Gambling and lottery winnings

Only cash winnings from the Pennsylvania lottery are taxed. Non-cash winnings are tax-free.

What Income Is Exempt in Pennsylvania?

Common types of income that are exempt from Pennsylvania income tax include:

  • Capital gains from the sale of a principal residence for those who satisfy ownership and use requirements
  • Personal use of employer-owned property
  • Child support
  • Alimony
  • Social security benefits, public and private pensions, and IRA distributions
  • Worker's compensation, unemployment benefits, and public assistance
  • Sick pay
  • Inheritances and gifts

If you receive any of these types of income, you will not need to pay tax on them.

What Tax Deductions Are There in Pennsylvania?

Pennsylvania doesn't allow many of the deductions that are permitted at the federal level, including:

  • Medical and dental expenses
  • Charitable donations
  • Casualty or theft losses
  • Student loan interest
  • Alimony
  • IRA deduction
  • Self-employment taxes

There are four deductions allowed for Pennsylvania personal income tax. These are for contributions to a:

  • Medical Savings Account
  • Health Savings Account
  • IRC Section 529 Qualified Tuition Program
  • IRC Section 529A Pennsylvania ABLE Savings Account Program

Medical and Health Savings Accounts

Medical savings and health savings account contributions are deductible to the extent that they're deductible for federal tax purposes on the return you'd file with the IRS. Your Pennsylvania deduction would be the same as your federal deduction.

Your federal deduction can be found on line 12 of IRS Schedule 1, which accompanies your Form 1040. You cannot claim this deduction in Pennsylvania if you can't also claim it on your federal tax return.

529 College Savings Plans

Any 529 college savings account contributions made during the year can be deducted up to $16,000 per beneficiary ($32,000 if married filing jointly). This deduction applies to both Pennsylvania 529 plans and out-of-state 529 plans.

Pennsylvania ABLE Savings Account Programs

Any contributions you make to an ABLE account are also tax deductible in Pennsylvania. The state allows a yearly deduction of up to $16,000 per year. This applies only to Pennsylvania ABLE accounts, not out-of-state accounts.

What Tax Credits Are Available In Pennsylvania?

Credits reduce your tax debt directly, just as though you had made a payment. Pennsylvania offers two primary credits to individuals.

The Resident Credit

The Resident Credit is a credit for gross or net income taxes paid to other states or foreign countries by Pennsylvania residents. To claim it, you will need to file PA-40 Schedule G-L. This credit is the lower of:

  • The actual amount of tax paid to the other state or country.
  • The Pennsylvania personal income tax rate multiplied by the amount of income subject to Pennsylvania income tax but sourceable to the other state or country.

Tax Forgiveness

The Tax Forgiveness Credit is extended to lower-income taxpayers for whom paying income tax would mean they cannot pay for basic necessities. Taxpayers who qualify can be single, married, and/or have dependents. Your income from all sources, including tax-exempt alimony, child support, and Social Security, cannot exceed certain income limits.

Income limits for this credit depend on the number of dependents you have. You can receive a credit of anywhere from 10% to 100% of your tax liability, depending on the number of your dependents and your income. You will need to file PA-40 Schedule SP to receive tax forgiveness.

Filing Your Return

You must file a Pennsylvania return if you received income that generates $1 or more in tax. You must also file if you sustained a loss from any transaction as an individual, sole proprietor, partner in a partnership, or Pennsylvania S-corporation shareholder. This rule applies to Pennsylvania residents, nonresidents, or part-year residents.

Forms are available on the Pennsylvania Department of Revenue's website. You can also call 1-888-PATAXES to order the forms and have them mailed or faxed to you.

You can mail your return, file over the telephone through Tele-file, fill out and submit your return online, or e-file using tax software, such as TurboTax. Returns and payment must normally be postmarked on or before April 15th.

Frequently Asked Questions (FAQs)

How do I track my Pennsylvania state income tax refund?

You can find out the status of your state tax refund on the Pennsylvania Department of Revenue website.

When do I have to pay Pennsylvania state income tax if I don't live there?

If you earn income in Pennsylvania, you will have to pay Pennsylvania person income tax on the amount you earn. However, you may be able to deduct the tax you pay to Pennsylvania from the taxes you pay in the state where you live.

Article Sources

  1. Pennsylvania Department of Revenue. "Personal Income Tax."

  2. Pennsylvania Department of Revenue. "Gross Compensation Overview."

  3. Pennsylvania Department of Revenue. "Deductions and Credits."

  4. PA529. "Frequently Asked Questions: What Are the Income Tax Benefits of Investing in a PA 529 Account?"

  5. PA ABLE. "Benefits."

  6. Pennsylvania Department of Revenue. "Tax Forgiveness."

  7. Pennsylvania Department of Revenue. "Brief Overview and Filing Requirements."