What Deductions Can I Claim on PA State Taxes?
Navigate Pennsylvania's unique tax system. Learn which specific deductions are allowed and how they differ from federal rules to properly file your state return.
Pennsylvania’s personal income tax system operates on a flat tax rate of 3.07%. This structure is different from the federal system, as the commonwealth does not offer a standard deduction or permit the wide array of itemized deductions available on a federal return. The methods for reducing taxable income are unique and more limited, as the state has a specific set of allowable subtractions from income that do not mirror federal tax law.
Allowable Pennsylvania Tax Deductions
Unreimbursed Employee Business Expenses
Pennsylvania allows for the deduction of certain unreimbursed business expenses for employees. These expenses must be directly related to your job and not paid back by your employer. To be deductible, the costs must be ordinary, actual, reasonable, and necessary for you to perform your work. This can include expenses such as union dues, fees for professional licenses, and the cost of work-related travel that is not reimbursed.
A common claim in this category is for work clothes and uniforms, provided they are specifically required for your job and not suitable for everyday wear. The cost of cleaning these items is also deductible. Similarly, small tools and supplies that you must purchase to do your job can be subtracted from your income. You should maintain records like receipts and logs to substantiate these claims.
Health and Medical Savings Accounts
Contributions to certain savings accounts provide a deduction on the state return. If you contribute to a Health Savings Account (HSA), those contributions can be deducted from your Pennsylvania income. This applies to contributions made by you or on your behalf, but not those made by your employer on a pre-tax basis.
Similarly, contributions to Archer Medical Savings Accounts (MSAs) and Medicare Advantage MSAs are also deductible. The state follows federal rules and contribution limits for these accounts, so you cannot deduct amounts if you are not eligible to claim them on your federal return. These accounts help individuals with high-deductible health plans save for medical expenses.
PA 529 and ABLE Contributions
The state encourages saving for education and disability-related expenses through specific programs. Contributions made to a PA 529 College and Career Savings Program account are deductible. For 2025, a taxpayer can deduct up to $19,000 per beneficiary, meaning a married couple could deduct up to $38,000 if they each contribute to an account for the same beneficiary.
Pennsylvania also provides a deduction for contributions to a PA ABLE (Achieving a Better Life Experience) account. These accounts are designed to help individuals with disabilities and their families save for disability-related expenses. Similar to the 529 program, the deduction is limited to $19,000 per contributor for 2025.
Common Federal Deductions Not Allowed in Pennsylvania
Pennsylvania’s tax law does not permit many common federal deductions. The state does not have a standard deduction, and taxpayers cannot claim deductions for the following:
- Mortgage interest
- Real estate and property taxes
- Charitable contributions
- Medical and dental expenses
- Personal exemptions for yourself or dependents
- Alimony payments
- Contributions to traditional Individual Retirement Arrangements (IRAs)
Information and Forms Needed to Claim Deductions
For Unreimbursed Employee Expenses
To claim unreimbursed employee business expenses, you must complete Form PA-40 Schedule UE, “Allowable Employee Business Expenses.” You will need to gather detailed records of your expenditures, such as receipts, mileage logs, and statements for union dues. The Schedule UE requires you to list each type of expense separately, such as travel, meals, and supplies, and provide the total amount for each category.
The form requires you to enter your total gross compensation and then subtract the specific, allowable expenses. If you received a partial reimbursement, you can only deduct the portion you paid out-of-pocket. You can download the form and its instructions from the Pennsylvania Department of Revenue website.
For PA 529 and PA ABLE Contributions
When preparing to claim deductions for contributions to PA 529 or PA ABLE accounts, you will need the annual contribution statements from your plan administrator. These documents confirm the total amount you contributed to each account during the tax year. This information is reported on PA-40 Schedule O, “Other Deductions.”
The schedule requires you to enter the qualifying account numbers and the specific amount of your deductible contributions for each program on separate lines. The form calculates a total of all “Other Deductions,” which you will then transfer to your main tax return. Ensure the amounts you claim do not exceed the annual contribution limits.
For HSA/MSA Contributions
For Health Savings Account (HSA) or Medical Savings Account (MSA) contribution deductions, you will need records of your contributions. This information is often found on Form 1099-SA, but your own contribution records or year-end statements from the financial institution are also necessary. These contributions are reported on PA-40 Schedule O. You must report the amounts you personally contributed, not any pre-tax amounts from an employer.
How to Report Deductions on Your Tax Return
Once you have completed the necessary schedules, the final step is to report the deduction amounts on your PA-40 Personal Income Tax Return. The process involves transferring the calculated totals from your schedules to the main form to properly reduce your income. The total from Schedule UE for unreimbursed employee expenses is taken from Line 10 of that schedule and entered on the designated line on the PA-40 form. Similarly, the total from PA-40 Schedule O, which includes contributions to HSAs, MSAs, PA 529 plans, and PA ABLE accounts, is transferred to its corresponding line.
When filing a paper return, you must attach the completed Schedule UE and Schedule O to your PA-40 form. If you are using tax preparation software or Pennsylvania’s myPATH e-filing system, the process is more streamlined. The software will prompt you to enter the information from your records, complete the electronic versions of the schedules, and will automatically transfer the final deduction amounts.