Tax in Pennsylvania: a complete guide
This Pennsylvania tax guide delves into everything you need to know about tax in the state, from income tax to sales, property and inheritance tax.
Pennsylvania state income tax
Pennsylvania has a flat state income tax of 3.07 percent.
Here's a comparison of income tax rates among some neighboring states:
|State||Income Tax Rates|
|Pennsylvania||3.07% flat rate|
|New York||4.00% - 8.82% (progressive tax brackets)|
|New Jersey||1.40% - 10.75% (progressive tax brackets)|
|Delaware||No state income tax|
|Maryland||2.00% - 5.75% (progressive tax brackets)|
This flat tax rate means everyone is charged the same amount regardless of their income.
However, it’s important to note jurisdictions and school districts may also impose taxes on wages or income, which residents will need to factor into their overall tax liability.
Pennsylvania also has a flat corporate income tax rate of 8.99 percent.
If compiling and filing your taxes is an area you struggle with, a financial advisor can help. They can take a deep dive into your finances and develop a tax strategy that meets your needs and could reduce your tax liability and save you money.
Pennsylvania sales tax
Sales taxes are a way many states raise revenue to fund local services, and Pennsylvania imposes a statewide sales tax of six percent on many goods and services.
Across the various counties, the sales tax rate varies dramatically, as local sales tax can also apply.
What does that mean in practice? Well, take Allegheny County, for example. Here, an additional one percent local sales tax is added. While in Philadelphia, those purchasing goods or services must factor in an extra two percent sales tax.
Sounding costly? The state also has some tax-cutting initiatives for residents to help lower their tax burden.
Unlike many other US states, Pennsylvania has no annual sales tax holidays, during which the state sales tax does not apply.
However, the state does have sales tax exemptions on specific goods, including:
Candy and gum
Residential heating fuels
Pennsylvania also imposes specific alcohol and cigarette taxes:
Beer tax is taxed at $0.08 per gallon
Liquor tax is taxed at 18 percent of consumer pricing
Wine is taxed at $2.50 per gallon
$2.60 per pack of 20 cigarettes
Pennsylvania property tax
According to data from the U.S. Census Bureau, the average American household spends $2,690 on real estate property taxes.
Property tax is an important source of revenue for all states, including Pennsylvania.
In Pennsylvania, the average effective property tax rate is 1.53 percent. This is higher than the majority of states in the US. Although, this can be higher or lower depending on where you live in the state, as tax rates vary from county to country.
Similar to other states, local governments within Pennsylvania use various methods to assess, calculate, and collect property taxes. For example, here is a snapshot of the median property taxes across the state by county:
|County||Median property tax|
Pennsylvania motor tax
There’s a six percent tax on the purchase price or current market value of a motor vehicle in Pennsylvania.
When purchasing a vehicle, you must also factor in the fuel cost. Pennsylvania does impose a fuel tax, including:
Gasoline is taxed at $0.61 per gallon
Diesel is taxed at $0.79 per gallon
Alternative fuel (including hydrogen) is taxed at $0.61 per gallon
Pennsylvania estate tax
Financial planning for when you’re no longer around is a necessary task. Pennsylvania makes one aspect of that easier for families as the state has no estate tax.
Only 12 US states impose an estate tax on their residents.
However, Pennsylvania has an inheritance tax ranging from 0 percent to 15 percent.
Pennsylvania retirement tax
Pennsylvania is considered a tax-friendly state when it comes to retirees.
Pennsylvania does not tax retirement income, meaning payouts from retirement savings accounts such as your 401(k) and IRA are tax-exempt.
Income from Social Security is also not taxed.
The state also boasts a range of benefits for potential retirees. Take property tax, for example; some homeowners and renters over the age of 65 may be eligible for property tax or rent rebates.
For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.