Pennsylvania's flat tax rate and what it means for your paycheck
Pennsylvania charges a flat state income tax of 3.07% on wages, salaries, and other earned income. This rate applies to everyone in the state regardless of how much you earn — there are no tax brackets that increase your rate based on higher income, the way the federal system works. The 3.07% comes out of your paycheck before you see it if you're a W-2 employee, or you pay it when you file your state return if you're self-employed.
The flat rate means a person earning $30,000 a year pays the same percentage as someone earning $300,000. Pennsylvania does not tax retirement income like Social Security or most pension payments, which is one reason the state's overall tax burden on retirees is lower than in many neighboring states.
Key Takeaways
- Pennsylvania's income tax rate is 3.07% on all earned income, with no variation based on how much you make.
- Your employer withholds this tax from your paycheck automatically if you're a W-2 employee, unless you claim exemptions on your PA-W4 form.
- Social Security benefits, most pensions, and retirement account withdrawals after age 59½ are not subject to Pennsylvania income tax.
- You file Pennsylvania income tax on Form PA-40 if you owe tax or want to claim a refund, separate from your federal return.
- Local earned income tax, charged by your municipality, is separate from state income tax and varies by location.
How withholding works on your paycheck
When you start a job in Pennsylvania, your employer asks you to fill out a PA-W4 form. This form tells your employer how much state income tax to withhold from each paycheck. Most people claim one withholance, which results in roughly the right amount being withheld so they don't owe or get a large refund at tax time.
If you claim zero withholances, more tax comes out of each check. If you claim more than one, less comes out. You can change your withholances at any time by submitting a new PA-W4 to your payroll department — you don't need your employer's permission, just their payroll contact information.
Self-employed people and those with income that isn't subject to withholding (like rental income or investment gains) typically need to pay estimated tax quarterly. The Pennsylvania Department of Revenue publishes due dates each year, usually in April, June, September, and January.
What income is and isn't taxed in Pennsylvania
Pennsylvania taxes wages, salaries, tips, bonuses, and self-employment income at the 3.07% rate. It also taxes interest and dividend income, though at a lower rate of 3.07% on interest and 3.07% on dividends (the same flat rate applies). Capital gains — profit from selling stocks, real estate, or other assets — are taxed as income at the same 3.07% rate.
Pennsylvania does not tax Social Security benefits, no matter your age or income level. It also exempts most traditional and Roth IRA withdrawals, 401(k) distributions, and pension income once you reach age 59½. Military retirement pay is fully exempt. This makes Pennsylvania attractive to retirees who live on pensions or Social Security.
Unemployment benefits are taxable in Pennsylvania. Gambling winnings are taxable. Gifts and inheritances are not taxed at the state level (though the federal government may tax large estates).
Local earned income tax on top of state tax
In addition to the state's 3.07%, your municipality may charge a local earned income tax (EIT) on wages and self-employment income. This is separate from state tax and varies widely — some townships charge 0.5%, others charge 1.5% or more. A few municipalities charge no local tax at all.
You can find your local rate by contacting your township or borough office, or by searching the Pennsylvania Department of Revenue's local tax rate database online. If you work in one municipality but live in another, you typically pay tax to the place where you work, though some agreements between municipalities allow you to pay your home municipality instead.
Local tax is also withheld from your paycheck if your employer is in Pennsylvania. If you're self-employed, you pay it when you file your local return, which is usually due the same day as your state return.
Filing your Pennsylvania income tax return
You file Pennsylvania state income tax on Form PA-40 (or PA-40-EZ if your situation is straightforward). This is separate from your federal Form 1040 — you must file both if you owe Pennsylvania tax. The state filing important date is the same as the federal important date, usually April 15.
You must file if you earned more than the minimum threshold set by the state each year (this amount changes annually and is published by the Department of Revenue). Even if you don't owe tax, you may want to file to claim the Earned Income Tax Credit or other refundable credits.
You can file online through the state's free software portal, by mail, or through a tax professional. If you file by mail, send your return to the address listed on the form instructions — do not send it to the federal IRS address.
Tax credits and deductions available in Pennsylvania
Pennsylvania offers an Earned Income Tax Credit (EITC) for low-income workers, which reduces your tax bill or results in a refund. The state credit is separate from the federal EITC and is calculated on your state return. You must claim the federal credit first to be may be able to access for the state credit.
The state also offers credits for property tax or rent paid (if you're a homeowner or renter with low income), and credits for dependent care expenses. Unlike the federal system, Pennsylvania does not allow a standard deduction — instead, you claim a personal exemption amount that reduces your taxable income.
If you're over 65, blind, or disabled, you may may have access to for additional exemptions. These are claimed on your PA-40 return and require documentation such as a birth certificate or doctor's letter.
What happens if you move to or from Pennsylvania
If you move to Pennsylvania during the year, you owe state income tax only on income earned while you were a resident. If you move out, you owe tax only on income earned before you left. You'll file a part-year resident return on Form PA-40 and report the dates you moved.
Your employer should adjust your withholding once you provide a new PA-W4 (if you're moving in) or a form stating you're no longer a Pennsylvania resident (if you're moving out). If your withholding isn't adjusted in time, you may owe additional tax or receive a refund when you file.
If you worked in Pennsylvania but moved out of state, you may still owe Pennsylvania tax on income earned while you lived here. Some states have reciprocal agreements with Pennsylvania that allow you to claim a credit for taxes paid to another state, but this varies.
Frequently Asked Questions
Does Pennsylvania have different tax rates for different income levels?
No. Pennsylvania uses a flat 3.07% rate for all earned income, regardless of how much you make. There are no tax brackets. This is different from federal income tax, which increases in steps as your income rises.
Is Pennsylvania income tax withheld automatically from my paycheck?
Yes, if you're a W-2 employee. Your employer withholds based on the PA-W4 form you complete when hired. If you're self-employed or have other income without withholding, you pay estimated tax quarterly or settle the bill when you file your return.
What's the difference between state income tax and local earned income tax?
State income tax (3.07%) goes to Pennsylvania. Local earned income tax goes to your municipality and varies by location — typically between 0.5% and 1.5%. Both are withheld from your paycheck and both are reported on separate returns.
Do I have to file a Pennsylvania return if I only have Social Security income?
No. Social Security is not taxed in Pennsylvania, so if that's your only income, you have no filing requirement. If you have other income (wages, pensions, interest), you may need to file even if Social Security is your largest source of income.
Can I claim Pennsylvania income tax on my federal return?
Yes, you can deduct state and local income taxes (including Pennsylvania state and local earned income tax) on your federal Schedule A if you itemize deductions. The total deduction is capped at $10,000 per year for all state and local taxes combined.