Pennsylvania State Taxes: What You Need to Know

Pennsylvania State Taxes Filling

Understanding Pennsylvania State Taxes helps residents, businesses, investors and retirees with planning and compliance. This guide covers all major taxes such as: income, sales & use, property, inheritance, corporate tax, with all rate data embedded here, and just two official outbound links for essential state reference.

Personal Income Tax: 3.07 % Flat State Rate (Plus Local Tax)

Pennsylvania applies a single flat personal income tax rate of 3.07 % to residents and non-residents on all taxed income types, including compensation, interest, dividends, business net profit, capital gains, rents, royalty income, lottery prizes, and trust/estate income (no deduction or exemption offered). This same rate applies to non-wage PA-source payments to non-residents (withholding required).

Philadelphia & Pittsburgh: Local Wage / Income Taxes

Local governments levy earned income taxes that must be withheld or filed separately. Two key examples:

Location	Resident Rate	Nonresident Rate	Notes
Philadelphia	3.75 %	3.44 %	Applies to wages, self-employment, unearned income; matching SIT and NPT rates
Pittsburgh (Allegheny County)	3 % (1 % city + 2 % school)	1 % school alone	Residents pay combined tax, non-residents only school district’s rate

Tip: PA tax returns (PA‑40) are separate from local income tax returns collected by local authorities or contractors.

Sales & Use Tax: 6 % State Plus Local Surtax in Three Counties

Pennsylvania charges a 6 % uniform state sales and use tax on most tangible goods and digital products, unless specifically exempted (e.g., unprepared groceries, prescription drugs, qualifying nonprofit purchases).

Certain counties add a local surtax:

Allegheny County (including Pittsburgh): +1 %
Philadelphia County: +2 %
Cameron County: +2 % (rarely appliable to tourists)

Use tax on internet or out-of-state purchases follows the same state + local rate; remember to round tax to 3 decimals before applying the standard rounding rule.

Example:

A $1,000 laptop in Allegheny County is taxed 7 %, therefore, the tax equals $70.00.

Property Tax: Locally Assessed, High by Dollar but Moderate by Rate

Pennsylvania has no statewide property tax; local governments fund schools, libraries, police, etc. through property taxes.

Effective tax burdens are among the highest in America: average effective rate is around 1.19 % of owner-occupied housing value, which is well above the national average.

Local programs often offer homestead exemptions and senior/disabled relief; there’s also the Property Tax/Rent Rebate Program for low-income seniors or disabled homeowners/renters, with eligibility published annually via the Department of Revenue.

Sample scenario: Homeowner in Chester County

Market value: $300,000
Effective rate: ~1.20 %
Annual tax: $3,600 (before any adjustments or rebates)

Corporate Net Income Tax: 7.99 % Rate in 2025 Down from 8.49 %

PA corporations pay a flat 7.99 % net income tax in calendar year 2025 on income apportioned to the Commonwealth; legislated rate cuts continue phased-down to 4.99 % by 2031.

Eligible deductions include federal net operating losses, dividends-received deduction, NOLs, and investment credits.

Sample scenario: Small C-corp with net taxable income $500,000

PA taxable net: $500,000
Tax owed: $39,950 at 7.99 %

Inheritance Tax: 4.5 %, 12 % or 15 %, No State Estate Tax

PA’s Inheritance Tax applies at death to taxable transfers; no separate state estate tax exists.
Rates depend on the beneficiary’s relationship to the decedent:
- 0 % to surviving spouse and children under age 21
- 5 % to lineal heirs (adult children, parents)
- 12 % to siblings
- 15 % to all other heirs

Example:

Adult child inherits $200,000

Tax = 4.5 % of $200,000 = $9,000

Social Security, Pensions, IRAs: Fully Exempt

In Pennsylvania, Social Security benefits, private or public pensions, 401(k)/IRA distributions are fully exempt from state tax (even if early). These income types are not taxed by local wage tax either.

Real-World Examples

Example 1:

Single Full-Time PA Resident, $80,000 W-2 Income

Tax Type	Amount
PA state tax (3.07 %)	$2,456
Pittsburgh local tax	$2,400 (3 %)
Total PA/Local burden	~$4,856
Effective combined rate	Approximately 6.07 %

Example 2:

Married Retired Couple (65+), $45,000 annual retirement income, plus $25,000 Social Security

Taxable income on PA‑40: $0 (pensions and Social Security exempt)
No state income tax on retirement income
Property tax/rent rebate: up to $650 credit available for qualifying seniors

Example 3:

PA Non-resident Freelancer earns $60,000 PA‑source net income

PA flat tax at 3.07 % (with withholding or quarterly payments) = $1,842
If working in Philadelphia, also subject to 3.44 % Philly wage tax on that income unless withheld by payer = up to $2,064, plus potential SIT/NPT filing.

PA Taxes Summary Table

Here is a table that will summarize all we reviewed so far:

Tax Type	Applies to	Rate / Notes
Personal Income Tax	Residents & non-residents	Flat 3.07 %, no brackets
Local Income/Wage Tax	Cities & school districts	Varies; Phila 3.75/3.44 %, Pittsburgh ~3 %
Sales & Use Tax	Consumers & short-term rentals	6 % + up to 2 % county surtax
Property Tax	Homeowners & commercial owners	Avg 1.19 % effective rate
Corporate Net Income Tax	C‑Corporations	7.99 % in 2025, declining
Inheritance Tax	Beneficiaries on PA estates	4.5 %, 12 %, or 15 %
Estate Tax	— (post‑mortem taxes)	None
Retirement Income	Pension, IRA, 401(k), Social Security	0% PA tax

What Makes Pennsylvania Unique

Flat tax rate avoids bracket complexity, but local wage taxes require separate filing and can raise combined rates over 6 %.
Retirement-friendly – no tax on pensions or Social Security.
Property taxes high in dollars, and programs like the Property Tax/Rent Rebate help low-income seniors.
Corporate taxes are gradually phasing downward to attract business.
Inheritance tax rates vary by heir class, with no estate-level tax.