Pennsylvania Tax Rates
 

Personal Income Tax
Pennsylvania has a flat tax rate of 3.07 percent on individual income, with no standard or itemized deductions or personal exemptions. A credit is allowed for income taxes paid to other states by residents of Pennsylvania. Wages earned from work performed in Pennsylvania by residents of Indiana, Maryland, New Jersey, Ohio, Virginia or West Virginia are not subject to Pennsylvania State Income Tax under a reciprocal personal income tax agreement.

Taxes in Pennsylvania are collected on eight income classes:

1. wages
2. interest
3. dividends
4. net profits from business, professional or farm
5. net gain from sale or disposition of property
6. net income from rents, royalties, patents and copyrights
7. gambling and lottery winnings (except PA state lottery prizes won after July 21, 1983)
8. income from estates or trusts

Social Security benefits, public and private pensions as well as IRA distributions are all exempt from state income tax in Pennsylvania.

Tax Forgiveness
Pennsylvania offers special tax forgiveness provisions for certain low-income taxpayers whose eligibility income does not exceed $6,500 (filing as a single) or $13,000 (married filing separately or jointly), plus $9,500 for each dependent. For a married couple with 2 children, the income allowance for 100% tax forgiveness would be $32,000. For a single parent with 2 children, the income allowance for 100% tax forgiveness is $25,500.

Filing Your Personal Income Tax Return
You must file a Pennsylvania income tax return (this applies to residents, part-year residents and non-residents) if your Pennsylvania taxable income exceeds $35 during the year, or if you incurred a loss from any transaction as an individual, sole proprietor, partner or shareholder of an S corporation. Completed tax forms and payment must be postmarked on or before April 15. Personal income tax forms are available at many area libraries, government offices, post offices and from the Pennsylvania Department of Revenue’s website (www.revenue.state.pa.us/).

Sales Tax
Pennsylvania imposes a 6 percent sales tax on taxable goods and services.

A local sales tax of 1 percent is collected on sales of taxable goods and services initiated from a location in Philadelphia and Allegheny counties (for a total of 7% sales tax in those localities).

Major items exempt from sales tax include food (not ready-to-eat), most wearing apparel, drugs, textbooks, sales for resale and residential heating fuels. A more complete list can be found under Tax Exempt Sales at the Pennsylvania Department of Revenue’s website.

Personal and Real Property Taxes
Pennsylvania does not levy or collect taxes on real estate or personal property. Those taxes are reserved for local governments: counties, municipalities and school districts. Real property taxes apply only to land and buildings.  Certain types of property are exempt from property taxes in Pennsylvania, including places of worship, places of burial, charitable and educational institutions, and government property.

Property taxes are based on millage rates set by individual municipalities and school districts. The amount of property tax is based on a combination of your assessed property value (as determined by the county assessment office) and the millage rates determined by the municipality and school district in which you live. One mill is equal to 1/1000 of a dollar, so, for every $1,000 in taxable value, a property owner will pay $1 in taxation per mill.

The state’s Property Tax/Rent Rebate program is available to qualified seniors and permanently disabled citizens. It is funded by the Pennsylvania Lottery and administered by the Pennsylvania Department of Revenue. Qualified taxpayers can be reimbursed up to $650 a year for the amount they paid in property taxes or rent in the previous year.

Local governments can impose a variety of local taxes, such as earned income tax or real property tax.  Employers are required to withhold from employees earned income and emergency and municipal services taxes imposed by municipalities and school districts.

Property Tax/Rent Rebate Program
The income eligibility level for the Property Tax/Rent Rebate Program has been raised from $15,000 a year to $35,000 a year, excluding half of Social Security income, and the maximum rebate has been increased from $500 to $650 for homeowners.

Claimants or spouses 65 years of age or older; widows or widowers 50 years of age or older; and the permanently disabled 18 years of age or older may qualify for the Property Tax/Rent Rebate Program.

In addition, property tax rebates have been increased by an additional 50 percent for senior households outside Philadelphia, Pittsburgh and Scranton, so long as those households have incomes under $30,000 and pay more than 15 percent of income in property taxes.

Inheritance and Estate Tax
Pennsylvania collects an inheritance tax.

The inheritance tax is imposed as a percentage of the value of a decedent’s estate transferred to beneficiaries by will, heirs by intestacy and transferees by operation of law. The tax rate varies depending on the relationship of the heir to the decedent.

The rates for Pennsylvania inheritance tax are as follows:

• 0 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger
• 4.5 percent on transfers to direct descendants and lineal heirs
• 12 percent on transfers to siblings
• 15 percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax.

Property owned jointly between husband and wife is exempt from inheritance tax.

Inheritance tax payments are due upon the death of the decedent and become delinquent nine months after the individual’s death. If inheritance tax is paid within three months of the decedent’s death, a 5 percent discount is allowed.

All information contained in this section is subject to legislative and regulatory change by the General Assembly and the Pennsylvania Department of Revenue. For more information, visit their website at www.revenue.state.pa.us/. Residents may also contact the automated FACT and Information Line at 888-PATAXES.