Pennsylvania state taxes include income taxes, sales taxes, real and personal property taxes, an inheritance tax, and even an obsolete estate tax. The state throws in a few other little tax surprises as well, depending on exactly what you purchase there. It has the second-highest gas tax in the country.
- Whereas many states charge property tax, Pennsylvania does not, rather leaving it to be charged at the municipal level.
- Pennsylvania is one of the few states with a flat tax system, charging 3.07% on income tax across the board.
- By some measures, Pennsylvania may forego the majority of the sales tax it could generate, due to a large number of exemptions.
- Pennsylvania is considered "tax-friendly" for corporations, with a relatively low top-tier rate, and for retirees, as pension income is tax-free.
Technically, Pennsylvania doesn't collect real and personal property taxes, not at the state level. But its counties, municipalities, and school districts do. Real property value is determined by a local assessor. Each jurisdiction has its own tax rate. Chester County had the highest property taxes as of 2021, and Forest County had the lowest. Homeowners pay an average of about 1.46% of their homes' values in taxes.
The median property tax was $2,223 per year in 2021—half of all tax bills were more than this, and half were less. The figure is based on a median home value of $164,700. This makes Pennsylvania the 16th highest property tax state in the country as of 2021.
The Property Tax/Rent Rebate
Pennsylvania's property tax/rent rebate program offers rebates for paid property taxes to homeowners or renters who qualify:
- You or your spouse must be 65 years or older.
- A widow or widower qualifies at age 50 or older.
- Those age 18 and older qualify if they are permanently disabled.
- A qualifying homeowner's annual income cannot exceed $35,000, and this includes half of their Social Security income.
- Renters cannot earn more than $15,000 annually, and the same Social Security rule applies.
Special rules were set in place in 2015 to prevent homeowners and renters from being disqualified on the basis of income due to Social Security cost-of-living adjustments.
The state encourages you to apply to find out. The worst that can happen is that your claim will be denied.
The maximum rebate is $650 as of 2021, down to $250 for those with higher incomes bumping up against the limits. But some senior homeowners can receive up to 50% more if they live in certain areas where the wage and income tax limits are very high (such as Philadelphia, Pittsburgh, or Scranton), or in other areas if they pay more than 15% in property taxes.
Personal Income Taxes
Pennsylvania is one of only a few states with a flat tax system. The state assesses a 3.07% tax rate regardless of how much income you earn. Pennsylvania doesn't allow taxpayers to deduct personal exemptions or to claim a standard deduction. A tax forgiveness credit is available to low-income filers.
Corporate Income Taxes
The Tax Foundation, the leading independent tax policy nonprofit in the country, ranks Pennsylvania 29th in the nation for "kind" corporate income taxes. The state has a top corporate tax rate of 9.99%.
Estate and Inheritance Taxes
Pennsylvania imposes an inheritance tax on individual bequests made to beneficiaries. This tax is payable by the beneficiary. Surviving spouses and surviving parents who inherit from a minor age 21 or younger are exempt. However, children who are 21 or younger who inherit from a parent are exempt as well.
The inheritance tax ranges from 4.5% on gifts to direct descendants, up to 12% for siblings, and 15% for all other beneficiaries. Some charitable, government, and political organizations are exempt.
Pennsylvania has an estate tax on its books, but it's no longer enforced. An estate tax is levied on the overall value of a decedent's estate.
Sales and Other Taxes
Pennsylvania's state-level sales tax is 6%. Allegheny County imposes an additional 1% local sales tax and Philadelphia adds 2%, but the average local sales tax rate is still just .34% for a combined state-and-local average of 6.34%.
As of 2021, the state had the third-highest gas tax in the U.S. at 58.7 cents a gallon.
Pennsylvania has taxed cigarettes at a rate of $2.60 per pack since 2016. On the bright side, this tax raises many millions of dollars annually for the Children's Health Insurance Program (CHIP) and the Agricultural Conservation Easement Purchase Fund.
Purchases Not Subject to Sales Tax
Public Citizens for Children and Youth (PCCY) reports that Pennsylvania forgoes more sales taxes than it collects. Some purchases that the state does not tax include:
- Newspapers and magazines
- Sports tickets
- The services of lawyers, accountants, cleaning services, and private chefs
All told, Pennsylvania doesn't tax almost 100 types of purchases. PCCY indicates that the state collects $9 billion in sales taxes annually, but purchases like these would bring in some $19 billion if they were taxed.
Frequently Asked Questions (FAQs)
What types of taxes do Pennsylvania residents pay?
Pennsylvania differs from many states in that its residents pay a flat income tax at a rate of 3.07%. Like most other states, however, they pay set rates on sales tax (with extra novelty taxes on items like cigarettes and other tobacco products, wine and liquor, medical marijuana, and gambling), property taxes, estate and inheritance taxes, gas tax, and many other niche taxes.
Is Pennsylvania a "tax-friendly" state?
Pennsylvania may be considered friendly to retirees. It is one of only a handful of states that does not tax income from pensions.
Can I file my Pennsylvania state taxes online?
As with most states, you can file your state taxes alongside your federal income taxes through most online tax preparation platforms. You can also visit the Pennsylvania Department of Revenue website to file online and to find specific forms and detailed instructions.