Pennsylvania Income Tax Guide 2026: Flat 3.07% Rate & Rules

Pennsylvania has a flat 3.07% income tax — one of the lowest rates in the nation, but local taxes can add significantly more.

The Keystone State’s flat tax system is straightforward: everyone pays the same 3.07% rate regardless of income. This simplicity is unusual compared to most states’ progressive systems, and it’s particularly advantageous for high earners. However, Pennsylvania’s lack of deductions and local earned income taxes (especially in Philadelphia) complicate the picture. Let’s break down what you’ll actually pay.

Pennsylvania Tax Rate 2026

How Pennsylvania Flat Tax Works

Pennsylvania vs. Neighboring States

One of Pennsylvania’s biggest tax advantages is geographic: it’s surrounded by higher-tax states. Confirm current top rates for comparison states before citing specific dollar figures, as several have adjusted rates. See our full state income tax rates comparison for details.

PA has the lowest state rate in the region.

Pennsylvania Local Taxes (EIT)

Pennsylvania allows municipalities to levy earned income taxes. Confirm current rates with each municipality, as these were not independently re-verified this session:

Local Tax Rates by Area (Confirm Current)

Total Tax Example (Philadelphia)

Pennsylvania School District Tax

Some PA school districts levy an additional Earned Income Tax (EIT) on top of municipal tax — confirm current rates with your specific school district, as this stacks with local and state taxes.

Pennsylvania Retirement Income

This is Pennsylvania’s crown jewel for tax planning. PA is excellent for retirees because it exempts most retirement income from state tax once distributions are taken after reaching normal retirement age. Social Security benefits, pensions, 401(k) withdrawals, and IRA distributions are generally untaxed at the state level under these conditions. Combined with the already-low 3.07% flat rate on other income, Pennsylvania ranks among the more tax-friendly states for retirement.

What Pennsylvania DOES Tax

Pennsylvania Does NOT Allow

Unlike most states, Pennsylvania:

• No standard deduction
• No personal exemption
• No itemized deductions
• No deduction for retirement contributions

You pay 3.07% on gross taxable income (not adjusted gross income) for most wage earners, though certain unreimbursed employee business expenses may be deductible against wage income.

Pennsylvania Tax Classes

PA taxes eight classes of income separately:

You cannot offset losses in one class against gains in another.

Pennsylvania Capital Gains Tax

PA taxes capital gains at the flat 3.07% rate — below the federal top capital gains tax rate of 20% for long-term gains. There’s no distinction between short-term and long-term holdings at the state level.

Pennsylvania Property Tax

Confirm the current average effective property tax rate and county-level figures with the Tax Foundation or Pennsylvania Department of Revenue, as these were not independently re-verified this session. Pennsylvania property taxes have historically been above the national average.

Pennsylvania Sales Tax

Pennsylvania’s sales tax is notable for what it doesn’t tax: groceries and most clothing are exempt.

Sales Tax Exemptions

Who Must File Pennsylvania Taxes?

You must file if you:

• Had PA source income
• Were a PA resident
• Were a part-year resident

There is a very low minimum income filing threshold — confirm the current exact amount with the Pennsylvania Department of Revenue.

Pennsylvania Tax Credits

Confirm current amounts with the Pennsylvania Department of Revenue, as these were not independently re-verified this session:

Pennsylvania vs. Other Low-Tax States

PA has low income tax; confirm current property tax comparisons before relying on them.

Pennsylvania Filing Options

Filing deadline: April 15

Pennsylvania Business Taxes

Confirm the current Pennsylvania corporate net income tax rate with the Department of Revenue, as this session did not independently re-verify it. Pennsylvania has historically been on a multi-year path to lower its corporate rate.

Moving to Pennsylvania

Good for:

• Retirees (little to no retirement income tax once at normal retirement age)
• High earners from NY/NJ (much lower state rate)
• Those avoiding Philadelphia local tax

Less favorable for:

• Low earners (no deductions to reduce tax)
• Philadelphia residents (6.82% total)
• Those in high property tax counties

Bottom Line

Pennsylvania has a flat 3.07% income tax — one of the lowest state rates. However, local earned income taxes (up to 3.75% in Philadelphia) can significantly increase your burden. A major benefit is limited taxation of retirement income — making PA one of the more tax-friendly states for retirees. Property taxes have historically been above the national average.

For a full comparison of how Pennsylvania stacks up nationally, see our state income tax rates guide.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.