Pennsylvania has a state income tax of 3.07 percent on wages, interest, and dividends

Yes, Pennsylvania charges state income tax. The rate is 3.07 percent on most types of income — wages from a job, interest earned on savings accounts or bonds, and dividends from stocks. This is a flat rate, meaning everyone in the state pays the same percentage regardless of how much they earn. Pennsylvania does not use a progressive tax system where higher earners pay a higher rate.

The 3.07 percent rate applies to your federal taxable income after you subtract the standard deduction or itemize deductions on your federal return. Pennsylvania follows federal rules for what counts as taxable income, so if an income source is not taxed federally, it is not taxed by Pennsylvania either.

Pennsylvania also taxes net profits from self-employment and business income at the same 3.07 percent rate. If you own a business or are self-employed, you report this income on your Pennsylvania return.

Key Takeaways

  • Pennsylvania's state income tax rate is a flat 3.07 percent on wages, investment income, and self-employment income.
  • Social Security benefits, certain retirement distributions, and military pensions are exempt from Pennsylvania state income tax.
  • You file Pennsylvania income tax using Form PA-40, which you submit to the Pennsylvania Department of Revenue.
  • Pennsylvania has no local income tax, so your state rate is the only income tax you owe to the state or its municipalities.

What types of income are taxed in Pennsylvania

Pennsylvania taxes earned income — wages, salaries, tips, and bonuses from employment. It also taxes unearned income like interest from bank accounts, dividends from stocks, capital gains from selling investments, and rental income. Self-employment income and net profits from a business are taxed at the same 3.07 percent rate.

Certain types of income are exempt from Pennsylvania state tax. Social Security benefits are never taxed by Pennsylvania, even if they are taxed federally. Distributions from IRAs and 401(k) plans are taxed by Pennsylvania, but military pensions and some government employee pensions are exempt. Unemployment benefits are also exempt from Pennsylvania state income tax.

If you receive income from sources outside Pennsylvania — for example, you work remotely for a company in another state — Pennsylvania still taxes that income if you are a resident. Nonresidents who earn income within Pennsylvania may owe tax on that specific income depending on the type of work and where it was performed.

How to file Pennsylvania state income tax

You file Pennsylvania state income tax using Form PA-40, the Pennsylvania Individual Income Tax Return. You submit this form to the Pennsylvania Department of Revenue. The filing important date is the same as the federal important date — typically April 15 of the year following the tax year, though the date shifts if April 15 falls on a weekend or holiday.

You can file on paper by mailing Form PA-40 to the Department of Revenue address listed on the form, or you can file electronically through the state's online system. Many tax software providers also support Pennsylvania filing. If you file your federal return electronically, you can file your Pennsylvania return the same way.

If you owe Pennsylvania income tax, you pay it when you file your return. If your employer withholds Pennsylvania tax from your paychecks, you may receive a refund if too much was withheld. If you are self-employed or have income without withholding, you may need to make estimated tax payments throughout the year.

Pennsylvania income tax withholding from paychecks

Your employer withholds Pennsylvania income tax from your paycheck if you work in the state or are a Pennsylvania resident working elsewhere. The amount withheld depends on the W-4 form you complete when you start a job. On the W-4, you claim allowances or enter additional withholding amounts to adjust how much comes out of each check.

If you work in Pennsylvania but live in another state, your employer still withholds Pennsylvania tax. You then file a Pennsylvania return and may receive a credit for taxes paid to your home state, depending on that state's rules. Some states have reciprocal agreements with Pennsylvania that affect withholding.

If you change jobs, get married, have a child, or experience another major life change, you can submit a new W-4 to adjust your withholding. This prevents you from overpaying or underpaying tax throughout the year.

Pennsylvania tax credits and deductions

Pennsylvania offers a standard deduction similar to the federal standard deduction, though the amount is different. For the 2024 tax year, the Pennsylvania standard deduction varies by filing status — single filers, married filing jointly, and head of household each have different amounts. You can claim the standard deduction or itemize deductions if itemizing results in a larger deduction.

Pennsylvania also offers tax credits for certain situations. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is calculated based on federal EITC rules. Some taxpayers may also may have access to for credits related to property tax or rent paid, though these are limited and have income thresholds.

Unlike some states, Pennsylvania does not offer a personal exemption credit for yourself or dependents. The state relies on the standard deduction to reduce taxable income rather than separate exemption amounts.

Comparing Pennsylvania's tax rate to other states

Pennsylvania's 3.07 percent flat income tax rate is lower than many neighboring states. New York's top rate reaches 6.85 percent, New Jersey's goes up to 10.75 percent, and Ohio's ranges from 0 to 5.75 percent depending on income. Delaware's rate is 5.75 percent, and Maryland's top rate is 5.75 percent. West Virginia's top rate is 6.5 percent.

However, Pennsylvania's rate is higher than some states that have no income tax at all — Florida, Texas, Tennessee, and Wyoming do not tax income. The overall tax burden also depends on sales tax, property tax, and other state and local taxes, not just income tax alone.

Pennsylvania has no local income tax, so residents do not pay an additional city or county income tax on top of the state rate. This differs from states like Ohio and Maryland, where some municipalities charge their own income tax.

Who must file a Pennsylvania income tax return

You must file a Pennsylvania income tax return if your income exceeds the filing threshold for your filing status. The threshold is based on your gross income and is typically higher than the federal threshold. Pennsylvania residents with any income from Pennsylvania sources should check the current year's instructions to determine if they must file.

Even if you are not required to file, you may want to file if you had Pennsylvania income tax withheld from your paychecks or made estimated payments. Filing allows you to claim a refund of any overpaid tax. You also file if you owe Pennsylvania tax and want to pay it.

Nonresidents who earned income in Pennsylvania may also need to file a Pennsylvania return, depending on the type and amount of income. The rules for nonresidents are more complex and depend on whether the income was from wages, self-employment, or other sources.

Frequently Asked Questions

Is Social Security taxed in Pennsylvania?

No. Pennsylvania does not tax Social Security benefits at the state level, regardless of your total income. This applies even if your Social Security is taxed on your federal return. You do not report Social Security on your Pennsylvania return.

Do I pay Pennsylvania income tax if I work remotely for an out-of-state company?

Yes, if you are a Pennsylvania resident. Pennsylvania taxes all income earned by residents, including income from remote work for employers located elsewhere. If you live in another state but work remotely for a Pennsylvania company, that state's rules determine whether you owe tax there.

What happens if I do not file a Pennsylvania income tax return when I should?

The Pennsylvania Department of Revenue may assess penalties and interest on unpaid tax. If you owe tax and do not file, penalties increase the longer you wait. If you are owed a refund but do not file, you can still claim it, but you have a limited time window — typically three years from the original due date.

Can I deduct federal income tax paid from my Pennsylvania state income?

No. Pennsylvania does not allow you to deduct federal income tax paid when calculating your Pennsylvania taxable income. You use the same deductions and income amounts as your federal return, but federal tax payments are not deductible.

Does Pennsylvania tax retirement account withdrawals?

It depends on the account type. Withdrawals from traditional IRAs and 401(k) plans are taxed as income. Withdrawals from Roth IRAs are not taxed. Military pensions and certain government employee pensions are exempt, but most private pension and annuity income is taxed at the 3.07 percent rate.