Pennsylvania state taxes include a flat 3.07% personal income tax, a 6% sales tax (7% in Allegheny County, 8% in Philadelphia), local earned income taxes set by your municipality and school district, an inheritance tax based on your relationship to the deceased, and locally assessed property taxes. The main annual return, Form PA-40, is due April 15.
Personal Income Tax: 3.07% Flat
Every Pennsylvania resident pays the same 3.07% rate on taxable income, whether they earn $30,000 or $300,000.1Department of Revenue. Personal Income Tax Rates What makes the state unusual is what it does and doesn’t count as income.
Only eight classes of income are taxable: compensation (wages, salaries, tips), interest, dividends, net profits from a business or profession, gains from selling property, rents and royalties, income from estates or trusts, and gambling or lottery winnings.2Commonwealth of Pennsylvania. Brief Overview and Filing Requirements Anything outside those buckets is not taxed by the state.
That rule creates real savings for retirees. Social Security benefits, distributions from eligible Pennsylvania retirement plans taken after retirement age, railroad retirement benefits, unemployment compensation, military retirement pay under Chapter 71 of Title 10, GI Bill benefits, and life insurance proceeds are all exempt from the state income tax.3Department of Revenue. Gross Compensation – Section: Income Items Never Taxable as Pennsylvania Compensation
Deductions Are Narrow
There is no standard deduction. You cannot itemize mortgage interest, charitable gifts, or state and local taxes. Pennsylvania allows only four deductions: contributions to a Medical Savings Account, a Health Savings Account, a 529 tuition program, or a Pennsylvania ABLE savings account.4Pennsylvania Department of Revenue. PA Personal Income Tax Guide – Deductions and Credits
Estimated Payments if You’re Self-Employed
Freelancers, landlords, and anyone with significant untaxed income must make quarterly estimated payments if their untaxed Pennsylvania income will exceed $9,500 for the year (about $292 in tax).5Commonwealth of Pennsylvania. Income Subject to Tax Withholding; Estimated Payments; Penalties, Interest and Other Additions For 2026, the due dates are April 15, June 15, September 15, and January 15, 2027.6Pennsylvania Department of Revenue. 2026 Instructions for Estimating PA Personal Income Tax
Sales and Use Tax: 6% Statewide
The state charges 6% sales tax on most goods, digital products, and certain services.7Department of Revenue. Sales, Use and Hotel Occupancy Tax Allegheny County adds 1% (7% total), and Philadelphia adds 2% (8% total).8Commonwealth of Pennsylvania. Tax Rates
Groceries for home consumption (not prepared meals), most clothing, candy and gum, textbooks, prescription drugs, computer services, and residential heating fuels like oil, gas, electricity, coal, and firewood are exempt.7Department of Revenue. Sales, Use and Hotel Occupancy Tax Digital products are not. Since 2016, the 6% tax has applied to Netflix, Hulu, Spotify, satellite radio, and downloaded music, e-books, and apps.9Commonwealth of Pennsylvania Department of Revenue. Tax on Digital Products
When an out-of-state seller doesn’t collect Pennsylvania sales tax on a taxable purchase, you owe the equivalent 6% use tax and are supposed to report it on your annual income tax return.
Local Earned Income Tax
Nearly every municipality and school district outside Philadelphia charges a local earned income tax (EIT) on wages, salaries, commissions, and self-employment profits. Combined rates typically fall around 1% to 2%, though some jurisdictions go higher. Your employer withholds based on the higher of your home rate or your work-location rate. The EIT applies only to earned income; interest, dividends, retirement distributions, and Social Security are not touched.
Philadelphia Wage and Earnings Tax
Philadelphia runs its own system. Effective July 1, 2025, residents pay 3.74% on wages and earnings, and non-residents who work in the city pay 3.43%.10City of Philadelphia. Earnings Tax (Employees) Self-employed workers pay the Net Profits Tax at the same rates.11City of Philadelphia. Net Profits Tax These rates stack on top of the state’s 3.07%, so a Philadelphia resident pays roughly 6.81% in combined state and local income tax on wages.
Local Services Tax
If you work in a municipality that imposes a Local Services Tax (LST), you pay a flat annual amount regardless of where you live. The maximum is $52 per year, usually withheld in small increments across your paychecks.12Local Government Commission. Local Services Tax – Pennsylvania Legislator’s Municipal Deskbook, 7th Ed. (2025) If you earn under $12,000 at that work location, you can claim an exemption in jurisdictions charging more than $10 per year.13PA Department of Community and Economic Development. Local Services Tax (LST)
Property Tax and Realty Transfer Tax
Pennsylvania has no state property tax, but school districts, counties, and municipalities all levy their own. The burden varies dramatically. Effective property tax rates range from about 1.5% of income in the lowest-burden counties to over 4.7% in the highest, largely because school funding leans heavily on local property tax.14Independent Fiscal Office. Property Tax Burden by County
If a home is your primary residence, apply through your county assessment office for the Homestead Exclusion, which reduces the assessed value subject to school district taxes. The amount is funded by state gaming revenue and varies by district.15PA Department of Community and Economic Development. Property Tax Relief Through Homestead Exclusion
Real estate sales trigger a 1% state realty transfer tax on the sale price. Most localities add their own 1%, bringing the combined rate to at least 2% in most areas, with some higher.16Department of Revenue. PA Realty Transfer Tax and New Home Construction On a $300,000 home, that’s at least $6,000, typically split between buyer and seller.
Inheritance Tax
Pennsylvania taxes the beneficiary who receives property from a deceased person. The rate depends on the relationship:
- Surviving spouse: 0%
- Parent receiving assets from a child aged 21 or younger: 0%
- Direct descendants and lineal heirs (children, grandchildren, parents in other circumstances): 4.5%
- Siblings: 12%
- All other heirs: 15%
Charities and government entities are fully exempt.17Department of Revenue. Inheritance Tax One point people often get wrong: assets passing to your own children are taxed at 4.5%, regardless of the children’s ages. The 0% rate for young children only runs the other direction, from a child aged 21 or under to a parent.
Life insurance proceeds are exempt whether paid to the estate or a named beneficiary.18Legal Information Institute. 61 Pa. Code 93.131 – Payments From Employment Benefit Plans and Life Insurance Contracts
The tax covers all real and tangible personal property in Pennsylvania, plus intangible property of any Pennsylvania resident wherever located. The return and payment are due nine months after the date of death. Pay within three months and you get a 5% discount on the tax owed.17Department of Revenue. Inheritance Tax
Relief Programs Worth Checking
Pennsylvania’s Tax Forgiveness program reduces or eliminates state income tax for lower-income filers. A married couple with two children qualifies for full forgiveness at $32,000 or less in eligibility income, with partial forgiveness on a sliding scale up to $34,250. A single filer with no dependents qualifies for full forgiveness at $6,500 or less.19Commonwealth of Pennsylvania Department of Revenue. Tax Forgiveness You claim it by filing PA Schedule SP with your return.
The Property Tax/Rent Rebate Program pays $380 to $1,000 to residents aged 65 and older, widows and widowers 50 and older, and people with disabilities 18 and older. For the 2025 tax year, the income limit is $48,110 and applications are accepted through June 30, 2026. Renters qualify, not just homeowners.20Commonwealth of Pennsylvania. Governor Shapiro Announces Opening of the Property Tax/Rent Rebate Application
Families with childcare expenses can claim the Child and Dependent Care Enhancement Tax Credit, which mirrors the federal credit. It maxes out at $1,050 for one qualifying dependent and $2,100 for two or more.21Department of Revenue. Child and Dependent Care Credit
Filing Deadline and Late Payment
Form PA-40 is due April 15, matching the federal deadline.22Pennsylvania Department of Revenue. 2026 State Tax Due Date Reference Guide You can file starting in late January through the state’s myPATH portal.
If you pay late, the Department of Revenue charges daily interest at an annual rate of 7% for 2026.23Pennsylvania Department of Revenue. 2026 Interest Rate and Calculation Method for Title 72 Taxes Interest runs from the original due date, so an extension to file is not an extension to pay. If you expect to owe, send the payment by April 15 even if the return itself goes in later.