So, you're looking at a move to the Keystone State or maybe you just landed a new job in Philly and realized your paycheck looks a little... different. You're probably asking, does Pennsylvania have state tax? Short answer: Oh, absolutely. But it’s not just one big number. It’s a bit of a jigsaw puzzle where the state, your city, and even your school district want a piece of the pie.
Pennsylvania is famous for its flat tax. Unlike the federal government, which charges you more as you make more, PA doesn't care if you're a barista or a billionaire. Everyone pays the same 3.07% on their personal income. Honestly, that sounds great on paper until you realize that local taxes are the real kicker here.
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The 3.07% Reality: Does Pennsylvania Have State Tax on Income?
When people ask if Pennsylvania has state tax, they usually mean income tax. For 2026, the rate is holding steady at 3.07%. It’s actually one of the lowest flat rates in the country. You won't find those complicated brackets here like you do in New Jersey or New York.
But there is a catch. Pennsylvania is big on "Earned Income Tax" (EIT) at the local level. If you live in Scranton, you’re looking at a local rate around 3.4%. Move to Philadelphia? Your resident wage tax is roughly 3.79%. That means your total "state and local" hit could easily climb above 6 or 7 percent depending on your zip code.
Interestingly, just this year, Upper Darby Township joined the club. Starting January 1, 2026, they enacted a new 1% local earned income tax. If you work there or live there, that’s a new line item on your pay stub you didn't have last year.
What counts as taxable income?
Basically everything. Wages, interest, dividends, and even net profits from your side hustle. However, PA is actually pretty friendly to retirees. Most pension income and Social Security benefits aren't taxed by the state. If you’re over 65, that 3.07% probably won't touch your retirement distributions, which is a massive win for the snowbirds who stay put in the Poconos.
Sales Tax: Beyond the 6% Sticker Price
Yes, Pennsylvania has state tax on what you buy, too. The base rate is 6%. But don't expect to pay exactly 6% everywhere.
- Allegheny County (Pittsburgh): They tack on an extra 1%, making it 7%.
- Philadelphia: They add 2%, so you’re paying 8% at the register.
Here is the weird part about PA sales tax: it’s incredibly specific about what is "essential." Most clothing is tax-free. You can buy a $500 tuxedo and pay zero sales tax. But if you buy formal wear for a rental? Taxed. Most groceries are tax-free, but "ready-to-eat" food is taxed. If you buy a cold rotisserie chicken at the grocery store, it might be tax-exempt, but if it's hot and ready under a heat lamp, you're paying the state.
Property Taxes and the 2026 Rebate Changes
Property tax in PA is the elephant in the room. There is no "state" property tax, but the local school districts and counties are aggressive. It’s why you see so many "Stop Tax Hikes" signs in yards from Erie to Allentown.
However, there’s a silver lining for 2026. The Property Tax/Rent Rebate (PTRR) program just opened its application window on January 15, 2026. Governor Josh Shapiro pushed through some big changes recently. Now, the maximum rebate is $1,000, and the income limit for both homeowners and renters is $48,110.
If you’re 65 or older (or a widow/widower over 50), you really need to look into this. They even let you exclude 50% of your Social Security when calculating if you qualify. For many seniors, this rebate covers a significant chunk of their yearly school taxes.
Business Taxes are Trending Down
If you're running a company, the answer to "does Pennsylvania have state tax" is a bit more optimistic than it used to be. For years, PA had one of the highest Corporate Net Income Taxes (CNIT) in the nation. It was a flat 9.99%, which was a total deal-breaker for some startups.
We are currently in the middle of a massive "phase-down."
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- 2025 rate: 7.99%
- 2026 rate: 7.49%
- 2027 goal: 6.99%
The plan is to keep dropping this until it hits 4.99% by 2031. It's a clear attempt to make the state more competitive with places like North Carolina or Ohio.
The "Death Tax" Nobody Likes to Talk About
Pennsylvania is one of the few states that still has a true Inheritance Tax. Even if you don't owe federal estate tax (and the federal limit just jumped to $15 million in 2026 thanks to the One Big Beautiful Bill Act), the state will still take a cut.
The rates depend entirely on who you are:
- Spouses: 0% (Tax-free, thankfully).
- Lineal heirs (kids/grandkids): 4.5%
- Siblings: 12%
- Anyone else: 15%
Even if you leave your house to your kids, the state wants 4.5% of its appraised value. It’s a bit of a gut punch during an already tough time, so a lot of local estate planners spend their whole careers trying to find ways around this.
Tax Forgiveness for Lower Incomes
It’s not all bad news. PA has a "Special Tax Forgiveness" program. If you’re a family of four making around $35,000, you might not owe any state income tax at all. You still have to file the return, but you get a credit that wipes out the 3.07%. In Philadelphia, if you get this state forgiveness, you can also apply for a refund on your city wage tax.
Actionable Next Steps for 2026
If you’re dealing with PA taxes this year, don't just wing it.
- Check your local EIT: Go to the PA Department of Community and Economic Development website and look up your specific "PSD Code." This tells you exactly what your local tax rate is so you aren't surprised by a bill in April.
- File for the Rebate: If you’re a senior or have a disability, get your PTRR application in via myPATH before the June 30, 2026, deadline.
- Look for the WPTC: There’s a new Working Pennsylvanians Tax Credit this year. It’s basically a state version of the federal Earned Income Tax Credit. It can put up to $805 back in your pocket if you qualify.
- Keep your receipts: If you moved to PA for work, some of those expenses might be deductible on the PA-40 form, even if the federal government stopped allowing them years ago.
Pennsylvania is a "flat tax" state, but the layers of local and inheritance taxes make it anything but simple. Just remember that 3.07% is only the beginning of the story.