What Is the Income Tax Rate in Pennsylvania?
Unpack Pennsylvania's income tax system, from its flat state rate to understanding local tax nuances and fulfilling your tax responsibilities.
Pennsylvania imposes a flat income tax rate on all taxable income, unlike a progressive tax structure where rates increase with income.
Pennsylvania State Income Tax Rate and Taxable Income
Pennsylvania levies a flat income tax rate of 3.07% on specific categories of income for both residents and non-residents, as stipulated by 72 P.S. § 7302. The state identifies eight distinct classes of income subject to this tax:
Compensation
Net profits from business operations
Interest
Dividends
Net gains or income from the disposition of property
Net gains or income derived from rents, royalties, patents, and copyrights
Income flowing through estates or trusts
Gambling and lottery winnings
The Pennsylvania income tax system does not permit standard deductions, personal exemptions, or itemized deductions.
Understanding Local Income Taxes
Residents of Pennsylvania often face local income taxes. These local taxes are primarily the Earned Income Tax (EIT) and the Local Services Tax (LST). The specific rates for the EIT can vary significantly based on an individual’s municipality of residence, school district, or even their place of employment.
The Earned Income Tax applies to earned income, encompassing wages, salaries, and net profits from a business or profession. The Local Services Tax is a flat-rate tax levied by some local governments and school districts on individuals working within their jurisdiction. Individuals can determine their precise local tax rates by consulting the Department of Community and Economic Development (DCED) website or by contacting their local tax collector.
Calculating Your Pennsylvania Income Tax
Calculating your Pennsylvania state income tax involves applying the flat 3.07% rate to the total amount of income across the eight taxable categories. For example, if an individual’s combined taxable income from all eight categories amounts to $50,000, their state income tax liability would be $1,535. The state tax form used for reporting income is the PA-40.
The local Earned Income Tax calculation involves applying the specific EIT rate, determined by residency or work location, to an individual’s eligible earned income. Separate local forms are used for EIT calculations. Pennsylvania offers the Tax Forgiveness Credit, which can reduce the tax liability for qualifying lower-income families and individuals.
Filing and Paying Pennsylvania Income Taxes
The deadline for filing both state and local income tax returns in Pennsylvania is April 15th. Several methods are available for filing your Pennsylvania state income tax return. Taxpayers can file electronically through myPATH, or utilize commercial tax software. Alternatively, individuals may choose to prepare and mail a paper return.
Paying your Pennsylvania state income tax can also be accomplished through various convenient methods. Options include making online direct debit payments via myPATH, using a credit or debit card (which may incur a convenience fee), or mailing a check or money order. For most wage earners, state and local taxes are collected throughout the year via employer withholding. Self-employed individuals or those with substantial non-wage income are typically required to make estimated tax payments quarterly to fulfill their obligations.