State & Local Taxes
Pennsylvania State Income Tax: 2026 Rate and Rules
Pennsylvania state income tax is a flat 3.07% on taxable income, one of the lowest flat rates in the country and unchanged since 2004. The rate applies to every dollar of taxable income with no brackets. Pennsylvania offers no standard deduction and no personal exemption, and it taxes income across eight separate classes that generally cannot offset one another. Most retirement income is exempt.
Two features set Pennsylvania apart from most states. First, the flat rate means a resident earning $40,000 and one earning $400,000 face the same 3.07% marginal and effective state rate before local taxes. Second, nearly every municipality and school district layers a local earned income tax on top, so the real burden depends heavily on where you live.
What is the Pennsylvania state income tax rate in 2026?
The Pennsylvania state income tax rate is 3.07% for 2026, a flat rate that applies to all taxable income regardless of amount or filing status. There are no tax brackets. The Commonwealth has held this rate steady since 2004, making it one of a small group of flat-tax states. Married couples pay the same 3.07% whether they file jointly or separately.
Because the rate is flat, Pennsylvania’s marginal rate and effective rate are identical before credits. A single dollar of additional taxable income adds roughly 3.07 cents of state tax. Local earned income tax, covered below, can push the combined figure meaningfully higher depending on the municipality.
The eight classes of taxable income
Pennsylvania taxes income in eight distinct classes, and this classification drives how the tax works. Income is measured class by class, and a loss in one class generally cannot reduce income in another. That structure differs sharply from the federal system, which pools most income on one return.
The eight classes are:
- Compensation (wages, salaries, tips, most bonuses)
- Interest
- Dividends
- Net profits from a business, profession, or farm
- Net gains or income from the disposition of property (capital gains)
- Net gains or income from rents, royalties, patents, and copyrights
- Income from estates or trusts
- Gambling and lottery winnings, including Pennsylvania Lottery cash prizes
The no-netting rule matters. If you have a $10,000 loss in your business (class 4) and a $10,000 capital gain (class 5), Pennsylvania generally taxes the full gain, because the loss cannot cross into the gains class. Limited offsets can apply within a class, and rules can vary by circumstance.
| Feature | Pennsylvania | Typical federal treatment |
|---|---|---|
| Rate structure | Flat 3.07% | Progressive, seven brackets |
| Standard deduction | None | Yes, adjusts annually |
| Personal exemption | None | Suspended through 2025 rules, varies |
| Loss offsets across income types | Generally not allowed | Broadly allowed with limits |
| Retirement income (age-eligible) | Largely exempt | Generally taxable |
No deductions, no exemptions, but some relief
Pennsylvania allows no standard deduction and no personal or dependent exemption. Most federal-style itemized deductions do not exist on the PA-40 return. A small number of adjustments are permitted, such as contributions to a 529 college savings plan, medical savings accounts, and certain unreimbursed employee business expenses, but the list is narrow.
The main relief mechanism is Tax Forgiveness, claimed on Schedule SP. It can reduce or eliminate PA income tax for lower-income households based on eligibility income and family size. In many cases a family of four can owe no state income tax up to a defined income threshold, though the exact figure depends on the tax year and dependents. Eligibility is separate from federal credits.
Local earned income tax (EIT) and the Philadelphia wage tax
On top of the 3.07% state rate, nearly every Pennsylvania municipality and school district levies a local earned income tax, typically around 1% for suburban residents and reaching higher in some jurisdictions. Philadelphia runs a separate wage tax at a notably higher rate. Local tax can be the larger part of a resident’s income tax bill.
Outside Philadelphia, local EIT usually falls between 1% and roughly 3.9% combined across municipality and school district. Two private administrators, Berkheimer Tax Administrator and Keystone Collections Group, collect EIT for most jurisdictions. Employers withhold it, and residents typically file a local return separate from the state PA-40.
Philadelphia does not participate in the standard EIT system. It imposes a wage tax that, effective July 1, 2026, is 3.735% for residents and 3.425% for non-residents who work in the city, based on the City of Philadelphia’s published schedule. The Parker administration and City Council have set a path of gradual rate reductions, so future-year rates may differ.
| Location | State rate | Typical local/wage rate (2026) | Approx. combined |
|---|---|---|---|
| Suburban PA municipality | 3.07% | ~1.0% EIT | ~4.07% |
| Philadelphia resident | 3.07% | 3.735% wage tax | ~6.81% |
| Philadelphia non-resident worker | 3.07% | 3.425% wage tax | ~6.50% |
Combined figures are illustrative and can vary by municipality, school district, and the specific wage tax rate in effect. Confirm your local rate with your municipality or the assigned collector.
Retirement income is largely exempt
Pennsylvania does not tax Social Security benefits, and it generally does not tax pensions, 401(k) withdrawals, or IRA distributions once you reach retirement age. This treatment makes the Commonwealth relatively favorable for retirees compared with states that tax retirement income under a progressive schedule. Federal tax rules still apply separately.
Distributions from qualified plans such as a 401(k) or traditional IRA are typically exempt from PA income tax once the account holder reaches 59½ or otherwise meets the plan’s retirement-age conditions. Public and private pensions from an eligible employer plan are generally not taxed. Roth distributions that are already tax-favored federally also generally escape PA tax.
Early withdrawals can be treated differently. If you pull funds from a retirement account before reaching retirement age, Pennsylvania may tax the portion representing prior untaxed contributions or earnings as compensation. The taxable amount depends on your cost recovery in the account and the type of plan, so early distributions warrant a close look.
Residency and who must file
Pennsylvania residents pay the 3.07% tax on all eight classes of income regardless of where the income is earned. Part-year residents and nonresidents pay only on Pennsylvania-source income. The state files individual income tax on Form PA-40, and reciprocal agreements can change how wages are taxed for commuters.
A full-year resident is generally someone domiciled in Pennsylvania or a statutory resident who maintains a permanent place of abode in the state and spends more than 183 days there. Nonresidents report PA-source income such as wages earned in the state, rental income from PA property, or gains from PA business activity.
Pennsylvania has reciprocal agreements with several neighboring states, including New Jersey, Ohio, Virginia, West Virginia, Maryland, and Indiana. Under these, a resident of a reciprocal state who works in Pennsylvania generally pays income tax only to their home state on those wages, and vice versa. Local wage taxes such as Philadelphia’s may not be covered by reciprocity, so out-of-state commuters can still owe city wage tax.
Filing deadline and how to pay
The Pennsylvania personal income tax return, Form PA-40, is due April 15 following the tax year, matching the federal deadline in most years. For the 2025 tax year, returns are due April 15, 2026. An extension gives more time to file but not more time to pay any balance due.
Pennsylvania grants an automatic extension to file when you have a valid federal extension, or you can request one on Form REV-276. The extension moves the filing date to October 15 but does not extend payment; interest and penalties can accrue on tax paid after April 15. Estimated payments may be required for income not subject to withholding, such as self-employment or investment income.
Frequently asked questions
Is Pennsylvania state income tax a flat rate?
Yes. Pennsylvania applies a single flat rate of 3.07% to all taxable income for 2026, with no brackets and no change based on filing status or income level. The rate has been unchanged since 2004. Because it is flat, your marginal and effective state rates are the same before local taxes and any Tax Forgiveness relief.
Does Pennsylvania tax Social Security and retirement income?
Pennsylvania does not tax Social Security benefits, and it generally does not tax pensions, 401(k) withdrawals, or IRA distributions taken at or after retirement age. This makes the state relatively retiree-friendly. Early withdrawals before retirement age may be taxable as compensation depending on the plan and your cost basis. Federal tax rules still apply.
What is the Philadelphia wage tax rate in 2026?
Effective July 1, 2026, the Philadelphia wage tax is 3.735% for residents and 3.425% for non-residents who work in the city, per the City of Philadelphia’s schedule. It applies on top of the 3.07% state income tax. The city has set a path of gradual reductions, so rates in later years may be lower. Confirm the current figure before withholding or filing.
Can I deduct anything on my Pennsylvania income tax return?
Pennsylvania allows no standard deduction and no personal exemption. Only a narrow set of adjustments applies, such as 529 plan contributions, medical and health savings account contributions, and certain unreimbursed employee business expenses. Lower-income households may qualify for Tax Forgiveness on Schedule SP, which can reduce or eliminate the tax depending on eligibility income and family size.
How does the local earned income tax work in Pennsylvania?
Nearly every municipality and school district outside Philadelphia levies a local earned income tax, often about 1% but sometimes higher, collected mainly by Berkheimer or Keystone Collections Group. Employers withhold it, and residents usually file a separate local return. The combined municipal and school district rate varies by address, so your total can differ from a neighbor’s in the next town.
When is the Pennsylvania income tax return due?
Form PA-40 is due April 15 following the tax year, so 2025 returns are due April 15, 2026. A valid federal extension or Form REV-276 extends the filing deadline to October 15, but not the payment deadline. Interest and penalties can apply to tax paid after April 15, and estimated payments may be required for income without withholding.
Internal resources: compare Pennsylvania against a bracketed system in our guide to New York State income tax, see which jurisdictions charge nothing in states with no income tax, understand the two-layer system in state vs federal income tax, calculate what you owe with what is tax liability, and review who must prepay in estimated tax payments.
Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.