The Pennsylvania tax code centers on a flat 3.07% personal income tax, a 6% state sales tax, a corporate net income tax currently at 7.49% and dropping, and an inheritance tax whose rate depends on who inherits. Local governments add their own earned income and services taxes on top. This guide walks through what each tax covers, who owes it, and how to file and pay.
Personal Income Tax
Pennsylvania taxes every dollar of taxable income at a flat 3.07%, with no graduated brackets.1Commonwealth of Pennsylvania. Personal Income Tax A person earning $35,000 pays the same rate as a person earning $350,000.2Pennsylvania General Assembly. Pennsylvania Code 72 P.S. 7302 – Imposition of Tax
The tax reaches only eight classes of income:3Legal Information Institute. 61 Pa. Code 121.9 – Taxable Income
- Compensation (wages, salaries, bonuses, tips, commissions)
- Net profits from a business or profession
- Net gains from the sale of property
- Rents, royalties, patents, and copyrights
- Dividends
- Interest
- Gambling and lottery winnings
- Estate and trust income
Income that doesn’t fit one of those eight categories isn’t taxed. That omission is why Pennsylvania is unusually friendly to retirees: Social Security benefits are exempt, and so are distributions from employer-sponsored pensions and 401(k) plans once you have retired and met your plan’s eligibility rules.4Commonwealth of Pennsylvania. Personal Income Tax Guide (REV-581) Early distributions taken before you qualify under your plan’s retirement conditions can still be taxed as compensation.
Who Counts as a Resident
You are a Pennsylvania resident for tax purposes if you are domiciled here, meaning you treat the state as your permanent home.5Legal Information Institute. 61 Pa. Code 121.3 – Residence Even without that intent, you become a statutory resident if you keep a permanent home in Pennsylvania and spend more than 183 days in the state during the year. Residents owe tax on all income from any source. Nonresidents owe the same 3.07% rate, but only on Pennsylvania-source income.6Commonwealth of Pennsylvania. Determining Residency for PA Personal Income Tax Purposes
Sales and Use Tax
The state sales tax is 6% on most tangible goods and certain services.7Pennsylvania Code and Bulletin. Pennsylvania Code 61 Chapter 31 – Imposition Allegheny County adds 1% for a 7% total, and Philadelphia adds 2% for an 8% total.8Commonwealth of Pennsylvania. Use Tax
Several everyday categories are exempt. Ordinary clothing and footwear are generally tax-free, though formal wear, fur articles, and sports-specific gear like golf shoes and ski boots are taxable.9Pennsylvania Code and Bulletin. Pennsylvania Code 61 Chapter 53 – Clothing Unprepared groceries, prescription medications, textbooks, and residential heating fuels are also exempt. Prepared foods and certain beverages are not.
Buy something from an out-of-state or online seller that doesn’t collect Pennsylvania sales tax, and you owe use tax at the same 6% (plus any local surcharge where you live).8Commonwealth of Pennsylvania. Use Tax You report and pay it directly to the Department of Revenue. Individual compliance is low in practice, but the department can assess unpaid use tax in an audit.10Commonwealth of Pennsylvania. Sales, Use and Hotel Occupancy Tax
Inheritance Tax
Pennsylvania taxes inherited assets at rates set by the heir’s relationship to the deceased:11Commonwealth of Pennsylvania. Inheritance Tax
- 0% to a surviving spouse
- 0% to a parent inheriting from a child age 21 or younger
- 0% to charitable organizations and government entities
- 4.5% to direct descendants, including adult children and grandchildren
- 12% to siblings
- 15% to all other heirs, including nieces, nephews, friends, and unrelated individuals
The taxable estate is reduced by reasonable administration costs, attorney and fiduciary fees, funeral and burial expenses (including the lot and gravestone), the family exemption, bequests for religious services related to the death, and debts the deceased owed at the time of death.12New York Codes, Rules and Regulations. Pennsylvania Code 72 P.S. 9127 – Expenses
The executor files Form REV-1500 with the Register of Wills in the county where the deceased lived, not with the Department of Revenue.13Commonwealth of Pennsylvania. REV-1500 Inheritance Tax Return Paying within three months of the death earns a 5% discount.
Realty Transfer Tax
When Pennsylvania real estate changes hands, a realty transfer tax applies to the sale price or fair market value. The state charges 1%, and most municipalities add roughly another 1%, so the combined rate is typically around 2%. Local rates vary, so the exact burden depends on the municipality. The tax applies to deeds, long-term leases over 30 years, and other title-transferring documents, and is due when the document is recorded. Buyer and seller are jointly liable, and the split is usually negotiated in the sale.
Corporate and Pass-Through Business Taxes
C corporations doing business in Pennsylvania pay a corporate net income tax of 7.49% for 2026.14Commonwealth of Pennsylvania. Corporate Net Income Tax The rate is phasing down from the prior 9.99% on this schedule:
- 2027: 6.99%
- 2028: 6.49%
- 2029: 5.99%
- 2030: 5.49%
- 2031 and beyond: 4.99%
Federal S corporations are automatically Pennsylvania S corporations unless they opt out by filing Form REV-976.15Commonwealth of Pennsylvania. Partnerships/S Corporations/Limited Liability Companies An S corporation generally doesn’t owe the corporate net income tax itself (built-in gains aside); each shareholder reports their share on a PA-40 and pays 3.07%. Partnerships and LLCs taxed as partnerships or S corporations work the same way: the entity files an information return, and the tax falls on the individual partners or members.
Local Earned Income and Services Taxes
On top of state taxes, most Pennsylvania municipalities and school districts levy a local earned income tax on wages and net profits. Rates vary by jurisdiction, commonly between 1% and 3%, and your employer withholds based on where you live and work. The Department of Community and Economic Development’s online lookup tool gives the exact rate for any address.16Pennsylvania Department of Community and Economic Development. Local Income Tax Information
If you work in a municipality that imposes a Local Services Tax, your employer deducts it from your pay. The statutory maximum is $52 per calendar year across all jurisdictions where you work.17Pennsylvania Department of Community and Economic Development. Local Services Tax Workers earning less than $12,000 from all sources within a taxing jurisdiction are generally exempt when the tax exceeds $10.
Relief Programs
Tax Forgiveness
Pennsylvania’s Tax Forgiveness program reduces or eliminates personal income tax for lower-income households. You claim it by filing PA Schedule SP with your PA-40, and the forgiveness runs from 10% to 100% of your tax liability based on income and family size.18Commonwealth of Pennsylvania. Tax Forgiveness A married couple with two children can qualify for some forgiveness up to $34,250. A single parent with two children qualifies up to $27,750. An unmarried individual with no dependents gets full forgiveness at $6,500 or below, and thresholds rise with each additional dependent.
Property Tax/Rent Rebate
This program pays cash rebates of up to $1,000 to eligible homeowners and renters.19Commonwealth of Pennsylvania. Property Tax/Rent Rebate Program You qualify as a Pennsylvania resident who is 65 or older, a widow or widower 50 or older, or a person with a disability 18 or older, with household income of $48,110 or less. Half of Social Security income is excluded from that calculation. Rebate amounts by income:
- $0 to $8,550: up to $1,000
- $8,551 to $16,040: up to $770
- $16,041 to $19,240: up to $460
- $19,241 to $48,110: up to $380
Filing, Paying, and Appeals
Personal income tax returns are due April 15 on Form PA-40, which asks for your Social Security number, residency status, and income details from W-2s and 1099s.20Commonwealth of Pennsylvania. PA-40 Pennsylvania Income Tax Return Pennsylvania calculates taxable income differently from the federal rules in several places, so expect state-specific adjustments.
The simplest way to file is through myPATH, the free state portal where you can prepare, submit, pay, and track refunds.21Commonwealth of Pennsylvania. myPATH Pennsylvania Tax Hub Commercial tax software that supports Pennsylvania also works.22Commonwealth of Pennsylvania. File a Pennsylvania Income Tax Return E-filed returns usually process in about four weeks; paper returns take eight to ten. Bank transfers are the fastest payment method, and credit card payments carry a 2.85% convenience fee.23Commonwealth of Pennsylvania. Make a Personal Income Tax Payment If you mail a check, use the voucher so the payment lands on the correct tax year.
Miss the filing deadline and the penalty is 5% of the tax owed, with another 5% added each month up to 25%; the minimum is $5.24Legal Information Institute. 61 Pa. Code 121.26 – Penalties for Failure to File or for Filing a Late Return Willfully failing to file or filing a fraudulent return is a misdemeanor. Unpaid tax also accrues interest; the Department of Revenue set the 2026 underpayment rate at 7% annually, with personal income tax overpayments earning the same 7% and other overpayments earning 5%.25Commonwealth of Pennsylvania. Current Interest Rate
To contest an assessment, file a petition with the Department of Revenue’s Board of Appeals within these windows:26Commonwealth of Pennsylvania. Time Limitations on Filing Petitions for Appeal (REV-1799A)
- 90 days from the mailing date for personal income tax, employer withholding, and pass-through assessments
- 60 days from the mailing date for sales and use tax, corporation tax, and realty transfer tax
- 60 days from receipt of the appraisement for inheritance tax
Missing these deadlines generally forfeits your right to challenge the assessment at the administrative level.