Pennsylvania Personal Income Tax

A personal income tax is levied in Pennsylvania against the taxable income of resident and nonresident individuals, businesses, and estates and trusts.

Pennsylvania Income Tax Rate:
Pennsylvania has a flat tax rate of 3.07 percent on individual income tax, with no standard deductions or personal exemptions. A credit is allowed for income taxes paid to other states by residents of Pennsylvania.

What Income is Subject to Taxes?:
Taxes in Pennsylvania are collected on eight income classes:

1. wages
2. interest
3. dividends
4. net profits from business, profession or farm
5. net gain from sale or disposition of property
6. net income from rents, royalties, patents and copyrights
7. gambling and lottery winnings (except PA state lottery prizes won after July 21, 1983)
8. income from estates or trusts

*Social Security benefits, public and private pensions as well as IRA distributions are all exempt from state income tax in Pennsylvania.

Tax Forgiveness:
Pennsylvania does offer special tax forgiveness provisions for certain low-income taxpayers whose income does not exceed $6,500 (filing as a single) or $13,500 (married filing separately or jointly, plus $9,500 for each dependent). For a married couple with 2 children, the income allowance for 100% tax forgiveness would be $32,000. For a single parent with 2 children, the income allowance for 100% tax forgiveness is $25,500.

Reciprocal States:
Wages earned from work performed in Pennsylvania by residents of Indiana, Maryland, New Jersey, Ohio, Virginia or West Virginia are not subject to Pennsylvania State Income Tax under a reciprocal personal income tax agreement. If PA taxes were improperly withheld from residents of these states, a tax return should be filed to obtain a refund.

Local Income Taxes:
In addition to state income tax, Pennsylvania localities are permitted to assess a wage tax on earned income only (known as the Earned Income Tax). Generally, the Earned Income Tax, or wage tax, is split between the municipality and the local school district. Most PA municipalities have a 1% cap for wage taxes, except in Home Rule municipalities (namely Philadelphia, Pittsburgh and Scranton) which are not subject to a minimum tax rate.

Pennsylvania Income Taxes - How They Compare:
According to the Tax Foundation, Pennsylvania's combined state/local income tax burden is estimated at 9.7% of income. Below the national average of 10.1%, this ranks the state 35th highest nationally. Unfortunately, personal property taxes in the state balance out some of these savings.

Filing Your Personal Income Tax Return:
You must file a Pennsylvania income tax return (this applies to residents, part-year residents and non-residents) if your Pennsylvania taxable income exceeds $35 during the year or if you incurred a loss from any transaction as an individual, sole proprietor, partner or shareholder of an S corporation.

Completed tax forms and payment must be postmarked on or before April 15. Personal income tax forms are available in many area libraries, government offices, post offices and from the Pennsylvania Department of Revenue's Web site.