Pennsylvania tax rates: Paying taxes in the Keystone State

Smiling man hiking in Pennsylvania and standing against treesImage: Smiling man hiking in Pennsylvania and standing against trees

In a Nutshell

If you live or work in Pennsylvania, you may have to pay state and local income taxes. But those aren’t the only taxes that apply in the Keystone State. You may also encounter property tax, sales tax or even an inheritance tax.
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This article was fact-checked by our editors and CPA Janet Murphy, senior product specialist with Credit Karma.

April 15 isn’t the only day you should be thinking about taxes — especially if you live in a state that has its own income tax and multiple other types of taxes. For example, Pennsylvania residents have a number of commonwealth-level and local taxes to keep track of.

Pennsylvania has a lot to offer, including plenty of history, outdoor activities and breathtaking fall foliage. It also has different types of taxes that all factor into the cost of living in the commonwealth.

Let’s look at Pennsylvania tax rates on income, sales and property, along with other types of taxes you may encounter in the Keystone State.

The basics of Pennsylvania taxes

The Pennsylvania Department of Revenue oversees the state’s tax laws. There are quite a few taxes — at both the state and municipal level — to be aware of. Luckily, the department provides a handy recap of Pennsylvania state taxes. Here are some of the common taxes you might encounter.

Type of tax Current tax rates
State income tax 3.07% on taxable income for individuals, estates, trusts, partnerships, S-corps, business trusts and LLCs not federally taxed as corporations
Local income tax Rate varies by municipality and applies to earned income such as wages, salaries, commissions, net profits or other compensation
Sales tax 6% throughout the commonwealth, plus an additional 2% for Philadelphia or 1% for Allegheny County
Property tax Levied by counties, cities, townships, boroughs and school districts, property taxes vary by jurisdiction
Realty transfer tax 1% of the value of real estate when the property changes hands through transfer of a deed, instrument, long-term lease or other written document
Estate and inheritance tax 0% to 15%
“Sin taxes” $2.60 per pack of 20 cigarettes, 18% on liquor and .0066 cents to $2.48 on malt beverages, based on volume

Pennsylvania income taxes

Pennsylvania has a flat state income tax of 3.07%. On top of the state income tax, municipalities and school districts can charge an extra tax on your income, called the earned income tax. Depending on where you live, your employer may have to withhold this tax for you.

State law limits the local earned income tax limit to 1%, with 0.5% going to the municipality and 0.5% going to the school district (if you live in an area where both bodies levy an income tax). But there are some exceptions to this limit, including home rule municipalities (which govern locally), municipalities in financial distress, or municipalities with financially distressed school systems.

For example, Philadelphia, a home rule municipality, charges an earned income tax of 3.8712% for residents and 3.4481% for nonresidents. Pittsburgh, another city that decides its own earned income tax, charges 3% for residents.

Pennsylvania income tax deductions

It may be possible to reduce your Pennsylvania income tax liability through four state-level tax deductions.

1. Medical savings account contributions (up to the federal contribution limit)

2. Health savings account contributions (up to the federal contribution limit)

3. Section 529 qualified tuition program contributions (up to the amount of the federal annual gift tax exclusion)

4. Section 529 Pennsylvania ABLE savings account contributions (up to the amount of the federal gift tax exclusion)

You may also be able to deduct certain unreimbursed employment-related expenses that aren’t currently deductible on your federal income tax return.

Pennsylvania sales and use taxes

Whether you’re a Pennsylvania native or just visiting the state, you’ll pay a statewide 6% sales tax on certain purchases and services. Philadelphia residents pay an extra 2% for local sales tax, and Allegheny County folks pay 1% more. Luckily, some things are tax-free, like food (but not ready-to-eat food), candy, most clothing, textbooks, computer services, prescription and nonprescription drugs, and residential heating fuels.

If you buy something to use or consume in Pennsylvania without paying sales tax, you’ll likely owe money for a use tax. Pennsylvania’s use tax rate is the same as its regular sales tax rate.

Pennsylvania property taxes

In Pennsylvania, school districts, municipalities and counties decide on the local property tax rates. Your property tax bill can be a combination of taxes (and rates) from those three taxing entities. If you need help understanding your property tax bill, you can usually contact your county tax assessor’s or tax collector’s office.

The Tax Foundation estimates Pennsylvania’s per capita state and local property tax collections at $1,478, which means it ranks 22nd in the country for property tax burden on residents. And homeowners pay approximately 1.46% of their home value in property taxes each year, the foundation says.

Pennsylvania property tax relief

If you’re struggling to pay your property taxes, and you meet age, income and other requirements, a state-level rebate program may help. Pennsylvania’s property tax/rent rebate program generally provides a maximum rebate of $650, although some homeowners may qualify for as much as $975.

If you own a home in a school district that has property taxes, and that home is your primary residence, you may also be eligible for property tax relief through a state homestead tax exemption. The amount of your exemption depends on where you live. For the 2019 school year, the exemption ranges from just $53 to as high as $686.

Pennsylvania inheritance and estate taxes

Pennsylvania taxes inheritances, basing the rate of tax on the heir’s relationship to the deceased person. A surviving spouse pays no inheritance tax on the estate of their deceased spouse. The same is true for a child 21 or younger inheriting their parent’s estate.

Adult children over 21, parents and grandparents pay a 4.5% tax. Siblings have to pay a 12% tax. Other heirs (except charities and tax-exempt institutions or government bodies) will have to pay a 15% tax.

Other taxes in Pennsylvania

Pennsylvania has several other types of taxes you may encounter. Here are a few.

  • Cigarette tax — The state charges $2.60 tax for a pack of 20 cigarettes or $26 per carton of 10 packs.
  • Malt beverage and liquor tax — Malt or brewed beverages are taxed at a rate that ranges from $.0066 for a half-pint to $2.48 for a barrel. You may also pay an 18% tax for liquor.

Even though you may not pay these taxes directly, it doesn’t mean you aren’t contributing to them. You can expect some companies to pass the added cost of doing business along to you when you purchase these goods.

Bottom line

You may only think about your taxes once a year around Tax Day, but federal income tax is far from the only kind of tax you pay. State and local taxes also affect your finances, so it’s important to understand how much those taxes cost you each year.

Pennsylvania residents may get an easy-to-understand, fairly low flat state income tax, but they also regularly pay sales, property and other types of tax. Understanding your state and local tax burden is an important aspect of taking control of your finances.

A senior product specialist with Credit Karma, Janet Murphy is a CPA with more than a decade in the tax industry. She’s worked as a tax analyst, tax product development manager and tax accountant. She has accounting degrees and certifications from Clemson University and the U.S. Career Institute. You can find her on LinkedIn.

About the author: Kate Dore is a Nashville-based personal finance writer and Candidate for CERTIFIED FINANCIAL PLANNER™ Certification. She teaches financial literacy with Junior Achievement and writes for Business Insider, Investopedia… Read more.