Pennsylvania State Taxes

Pennsylvania state taxes include income taxes, sales taxes, real and personal property taxes, an inheritance tax, and even an obsolete estate tax. The state throws in a few other little tax surprises as well, depending on exactly what you purchase there. It had the highest gas tax in the country in 2022.

Personal Income Taxes

Pennsylvania is one of only a few states with a flat tax system. The state assesses a 3.07% tax rate regardless of how much income you earn.

But that doesn't necessarily mean your Pennsylvania income taxes will be lower than in states that have a progressive income tax. Unlike other states, Pennsylvania doesn't allow taxpayers to claim a standard deduction or personal exemption. And it only has four categories of itemized deductions: contributions to medical savings accounts, health savings accounts, 529 college savings plans, and 529A Pennsylvania ABLE Savings Account Programs.

It does have two tax credits. The resident credit allows Pennsylvania residents to get a credit for gross or net income taxes paid to other states or foreign countries. And a tax forgiveness credit is available to low-income filers.

Property Taxes

Technically, Pennsylvania doesn't collect real and personal property taxes—not at the state level anyway. But its counties, municipalities, and school districts do. Real property value is determined by a local assessor. Each jurisdiction has its own tax rate. Chester County had the highest property taxes as of 2022, and Forest County had the lowest. Homeowners pay an average of about 1.35% of their homes' values in taxes.

The median property tax was $2,223 per year in 2022—half of all tax bills were more than this, and half were less. The figure is based on a median home value of $164,700. This makes Pennsylvania the 16th highest property tax state in the country as of 2022.

The Property Tax/Rent Rebate

Pennsylvania's property tax/rent rebate program offers rebates for paid property taxes to homeowners or renters who qualify:

• You or your spouse must be 65 years or older.
• A widow or widower qualifies at age 50 or older.
• Those age 18 and older qualify if they are disabled.
• A qualifying homeowner's annual income cannot exceed $35,000 (half of their Social Security income is excluded).
• Renters cannot earn more than $15,000 annually, and the same Social Security rule applies.

Special rules were set in place in 2015 to prevent homeowners and renters from being disqualified on the basis of income due to Social Security cost-of-living adjustments.

The maximum rebate is $650, and it's for taxpayers who earn $8,000 or less. The smallest rebate is $250 for those with higher incomes bumping up against the limits. But some senior homeowners can receive up to 50% more if they live in certain areas where the wage and income tax rates are very high (Philadelphia, Pittsburgh, or Scranton), or in other areas if they pay more than 15% in property taxes.

Estate and Inheritance Taxes

Pennsylvania imposes an inheritance tax on individual bequests made to beneficiaries. This tax is payable by the beneficiary. Surviving spouses and surviving parents who inherit from a minor age 21 or younger are exempt.

The inheritance tax ranges from 4.5% on gifts to direct descendants, up to 12% for siblings, and 15% for all other beneficiaries. Some charitable, government, and political organizations are exempt. 

Sales and Other Consumption Taxes

Pennsylvania's state-level sales tax is 6%. Allegheny County imposes an additional 1% local sales tax and Philadelphia adds 2% (the maximum allowed), but the average local sales tax rate is still just 0.34% for a combined state-and-local average of 6.34%.

The state had the highest gas tax in the U.S. in 2022 at 57.6 cents a gallon.

Pennsylvania has taxed cigarettes at a rate of $2.60 per pack since 2016. This tax raises tens of millions of dollars annually for the Children's Health Insurance Program (CHIP) and the Agricultural Conservation Easement Purchase Fund.

Purchases Not Subject to Sales Tax

Public Citizens for Children and Youth (PCCY) reports that Pennsylvania forgoes more sales taxes than it collects. Some purchases that the state does not tax include:

• Haircuts
• Horses
• Newspapers and magazines
• Candy
• Sports tickets
• The services of lawyers, accountants, cleaning services, and private chefs

All told, Pennsylvania doesn't tax almost 100 types of purchases. PCCY indicates that the state collects $9 billion in sales taxes annually, but purchases like these would bring in some $19 billion if they were taxed.

Corporate Income Taxes

Pennsylvania had a top corporate tax rate of 9.99% in 2022—the second-highest in the country. But that rate fell to 8.99% in 2023 and will continue to decline every year until Jan. 1, 2031, when it will bottom out at 4.99%.

Frequently Asked Questions (FAQs)