What Is the Pennsylvania State Income Tax?

The Pennsylvania state income tax is a levy imposed by the Commonwealth on income earned or received by individuals. This revenue supports public education, infrastructure, healthcare, and other essential government functions. Unlike the federal income tax system, Pennsylvania employs a distinct approach to taxing income.

Understanding Taxable Income Categories

Pennsylvania’s personal income tax system identifies eight specific classes of income subject to taxation. This approach differs from the federal system, which broadly taxes adjusted gross income. A loss in one class of income cannot be offset against income in another class, nor can gains or losses be carried forward or backward from year to year.

The eight classes of income include:
Compensation
Interest
Dividends
Net profits from operating a business, profession, or farm
Net gains or income from the disposition of property
Income from rents, royalties, patents, and copyrights
Income received through estates or trusts
Gambling and lottery winnings, specifically cash prizes from the Pennsylvania Lottery

Calculating Your Pennsylvania Tax

Pennsylvania utilizes a flat tax rate for personal income, meaning all taxable income, regardless of the amount, is taxed at the same percentage. For the 2024 tax year, this rate is 3.07 percent. This flat rate applies to all eight classes of income.

The state tax system provides limited deductions and exemptions. Unlike the federal system, there is no standard deduction or personal exemption. However, individuals may reduce taxable compensation for certain unreimbursed employee expenses, provided these expenses are ordinary, actual, reasonable, necessary, and directly related to their occupation.

Pennsylvania law also permits deductions for contributions to specific savings vehicles. These include medical savings accounts, health savings accounts, and Section 529 tuition account programs. Many common federal deductions and exemptions are not applicable under Pennsylvania state income tax law.

Who Must File and What You Need

Any individual who is a Pennsylvania resident, part-year resident, or nonresident earning taxable income sourced within the state must file a Pennsylvania Income Tax Return (PA-40). A return is required if gross taxable income exceeds $33, even if no tax is due. Filing is also necessary if an individual incurs a loss from certain transactions, such as those as a sole proprietor or partner.

Residency status determines filing requirements and the scope of taxable income. A Pennsylvania resident is someone domiciled in the state, meaning it is their permanent legal home. An individual can also be a statutory resident if they maintain a permanent place of abode in Pennsylvania and spend more than 183 days of the taxable year in the state. Residents are taxed on all income, regardless of its source, but may qualify for credits for taxes paid to other states.

Part-year residents are taxed on all income earned while a resident and on Pennsylvania-sourced income during their nonresident period. Nonresidents are taxed only on income derived from Pennsylvania sources. The primary tax form for individuals is the PA-40, which is used by full-year residents, part-year residents, and nonresidents to report income and calculate tax liability. Supporting schedules, such as Schedule W-2S for wage information, may be necessary depending on the taxpayer’s specific income and deductions.

How to File and Pay Your Tax

Taxpayers have several options for submitting their completed Pennsylvania Personal Income Tax Return (PA-40). The Pennsylvania Department of Revenue offers myPATH for secure electronic submission. Commercial tax preparation software also provides e-filing services. A paper return can be printed, filled out, and mailed to the appropriate address provided in the PA-40 instructions.

If tax is due, online payments can be made through myPATH using a direct debit or credit/debit card, though card payments may incur a convenience fee. Taxpayers can also mail a check or money order with a payment voucher. Automated phone payment options are available.

Estimated tax payments are required for individuals who expect to owe more than a certain amount of tax, particularly those with income not subject to withholding, such as self-employed individuals. These payments are made quarterly throughout the year to cover tax obligations. For employees, Pennsylvania law requires employers to withhold state income tax from compensation at the flat 3.07 percent rate, remitting these amounts to the Department of Revenue regularly.