Pennsylvania Income
Tax Rates & Rules

Pennsylvania imposes a flat 3.07 percent personal income tax on taxable income in 2026. Unlike the federal system, Pennsylvania does not use a standard deduction, personal exemption or graduated individual tax brackets.

Pennsylvania Uses a Flat 3.07 Percent Personal Income Tax Rate

The Pennsylvania personal income tax rate has been 3.07 percent since 2004 and remains the current rate in 2026. The same flat state rate applies to taxable income rather than increasing through higher state brackets.

A flat rate does not mean Pennsylvania taxable income equals federal taxable income. Pennsylvania defines its own taxable income categories, exclusions plus deductions, so the tax base can differ substantially from federal adjusted gross income or federal taxable income.

Pennsylvania Taxes Eight Separate Classes of Income

Pennsylvania organizes taxable income into eight statutory classes. Income must fit one of these classes before it is subject to Pennsylvania personal income tax.

• Compensation
• Interest
• Dividends
• Net profits from a business, profession or farm
• Net gains from the sale, exchange or disposition of property
• Net income from rents, royalties, patents plus copyrights
• Income through estates or trusts
• Gambling and lottery winnings subject to Pennsylvania tax

A loss in one Pennsylvania income class generally cannot offset income in another class. Gains or losses also generally cannot be carried backward or forward from year to year for Pennsylvania personal income tax.

Pennsylvania Has No Standard Deduction or Personal Exemption

Pennsylvania does not allow the federal standard deduction, federal itemized deductions or a personal exemption in the state personal income tax calculation. This is one of the biggest differences between Pennsylvania and many other state income tax systems.

Pennsylvania does allow specific deductions, exclusions plus credits under state law. For example, certain direct unreimbursed employee business expenses can be deductible when they satisfy Pennsylvania's rules, while ordinary personal expenses are not.

Who Must File a Pennsylvania Personal Income Tax Return?

Pennsylvania has a very low filing threshold. Under the current filing rule, a taxpayer who receives more than $33 in total gross Pennsylvania taxable income generally must file a PA-40 unless a specific exception applies.

A taxpayer can also need to file to claim a refund of Pennsylvania tax withheld, claim credits or report Pennsylvania-source income as a nonresident. Pennsylvania follows the federal April 15 due date, subject to the next-business-day rule when the date falls on a weekend or holiday.

Residents, Part-Year Residents and Nonresidents Are Taxed Differently

A Pennsylvania resident is generally taxed on taxable income regardless of source. A nonresident is taxed only on Pennsylvania-source income. A part-year resident is taxed as a resident for the resident portion of the year plus as a nonresident for the remaining portion.

While a part-year resident is a nonresident, ordinary interest, dividends plus gains from intangible property generally are not subject to Pennsylvania tax merely because the taxpayer previously lived in Pennsylvania. Pennsylvania-source business or compensation income can still be taxable.

Pennsylvania Has Reciprocity With Six States

Pennsylvania has reciprocal compensation agreements with Indiana, Maryland, New Jersey, Ohio, Virginia plus West Virginia. Qualifying residents of those states generally do not pay Pennsylvania personal income tax on employee compensation covered by the agreements.

The reciprocity agreements apply to employee compensation, not every type of income. Business income, nonemployee compensation, rental income plus other Pennsylvania-source income can still be taxable to a resident of a reciprocal state.

A qualifying reciprocal-state employee can use Form REV-419 with the employer when the form and employer arrangement allow Pennsylvania withholding to stop so the correct resident-state tax can be withheld instead.

Pennsylvania's Convenience-of-the-Employer Rule Can Affect Remote Workers

Pennsylvania applies a convenience-of-the-employer doctrine when determining whether a nonresident employee can allocate compensation to work performed outside Pennsylvania. Working from another state for personal convenience does not automatically make those wages non-Pennsylvania income.

The key question is whether the work outside Pennsylvania is performed out of necessity for the employer rather than only for the employee's convenience. A nonresident remote worker should therefore review the facts of the work arrangement before assuming that every home-office day can be excluded from Pennsylvania compensation.

For paycheck withholding rather than annual sourcing analysis, the Pennsylvania paycheck calculator is the better tool for a pay-period estimate.

Pennsylvania Withholding Is 3.07 Percent of Taxable Compensation

Pennsylvania employers generally withhold state personal income tax at the flat 3.07 percent rate from taxable employee compensation. Resident employees can be subject to withholding for services performed inside or outside Pennsylvania, while nonresident employees are generally subject to withholding for Pennsylvania services unless a reciprocity rule or other exemption applies.

Withholding is a payment toward annual Pennsylvania tax. It does not determine whether an item is taxable under one of the eight income classes or whether an exclusion, credit plus reciprocity rule applies.

Pennsylvania Does Not Tax Social Security and Many Qualified Retirement Distributions

Pennsylvania does not tax Social Security benefits. It also excludes many retirement distributions from eligible Pennsylvania retirement plans when the distribution qualifies under the state's retirement rules.

Retirement treatment depends on the plan and the reason for the distribution. An early withdrawal or payment that does not meet Pennsylvania's retirement criteria can be taxable even when a normal retirement-age distribution would be excluded.

Estimated Pennsylvania Tax Can Be Required on Income Without Withholding

Pennsylvania generally requires estimated tax payments when Pennsylvania taxable income not subject to employer withholding is reasonably expected to exceed $9,500, which corresponds to $292 of state tax at the 3.07 percent rate.

Estimated payments commonly affect self-employed taxpayers, investors plus residents whose employer does not withhold Pennsylvania tax. Installments can be required during the year once the threshold is reasonably expected to be met.

Pennsylvania Local Earned Income Taxes Are Separate From the 3.07 Percent State Tax

Pennsylvania municipalities and school districts can impose local earned income taxes that are separate from the statewide 3.07 percent personal income tax. A worker can therefore have state withholding plus local earned income tax withheld from the same paycheck.

Local rates and collection rules depend on residence and work location. Philadelphia also administers its own wage tax system. These local taxes should not be described as Pennsylvania state tax brackets because they are separate local obligations.

Pennsylvania Does Not Allow Cross-Class Loss Offsets

A loss in one Pennsylvania income class generally cannot reduce taxable income in another class. For example, a business loss does not automatically offset taxable compensation, interest or dividends.

Pennsylvania also generally does not allow a taxpayer to carry a personal income tax loss backward or forward to another year. This can cause Pennsylvania taxable income to differ sharply from federal taxable income.

Tax Forgiveness and Credits Can Reduce Pennsylvania Liability

Pennsylvania does not have a standard deduction. Eligible taxpayers can reduce tax through specific state programs. Tax Forgiveness can reduce some or all state personal income tax for qualifying low-income taxpayers. Other credits can apply under current law.

Credits do not change the 3.07 percent statutory rate. They reduce the tax liability after Pennsylvania taxable income is calculated under the state rules.

Payroll Records Help Reconcile Pennsylvania Income Tax

A pay stub can show Pennsylvania state withholding, local payroll taxes plus year-to-date wages, but the PA-40 determines final state personal income tax. Taxpayers should reconcile Forms W-2, 1099 plus other year-end records before filing.

Employers who need a lawful payroll record can use the Pennsylvania pay stub generator after wages and deductions are verified. The main check stub generator should be used only with genuine payroll information.