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Home to the chocolate capital of the world and the Liberty Bell, Pennsylvania offers up plenty of northeastern charm. Boasting one of the lowest income tax rates in the nation, it’s no wonder why it’s always sunny in Philadelphia! As residents welcome the winter season with snowy cityscapes and treetops, the signal of the approaching tax season turns faces red every year.

Whether you’re brand new to the tax game or you’re a seasoned filer, tackling tax season always comes with a slew of questions, document collecting, and painstaking calculating. Using this guide, we’ll give you the lowdown on all of the information you may need.

Get a head-start on tax time by using our Pennsylvania state income tax calculator. Gain valuable insight on the numbers you can expect to see on your tax bill or long-awaited return check.

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Overview of Pennsylvania State Taxes

Before we dive into Pennsylvania’s lengthy list of state tax regulations, let’s first discuss the differences between state and federal taxes. Next, we’ll lay out the fundamental tax rates you should know about as a Keystone State resident and taxpayer.

State taxes vs. federal taxes

One of the most common tax season blunders taxpayers make is wrongly assuming there is no distinction between state and federal taxes. Unless you’re a resident of one of the seven states that does not require a state-level tax return (Alaska, South Dakota, Texas, Florida, Nevada, Washington, and Wyoming residents, we’re looking at you!), tax season means filing two completely separate returns.

While you will likely need to provide much of the same personal information, it’s important to understand how the two differ and where your time and earnings are going in the grand scheme of things.

Federal taxes are government taxes levied by extension of the Internal Revenue Service (IRS). Each form of taxation, from income tax to estate tax is governed by a separate body of law. Federal taxes are employ standardized rates and fixed structures, which means the same set of laws, obligations, and restrictions apply to every US taxpayer across the country. The funds collected from federal taxes go toward supporting multiple government projects and expenditures, including everything from public education and Social Security to military defense and Medicare.

State taxes, on the other hand, are controlled and collected by individual states’ independent government. This means state tax regulations vary on a state to state basis, so Pennsylvanians can expect sporadically different tax requirements than those of California taxpayers.

State tax systems can work on either flat or progressive income tax systems. Flat-rate systems require all state taxpayers to pay a delegated percentage of their income tax whereas a progressive income system employs a bracketed structure that divides tax responsibilities up by income thresholds.

What does “state tax” mean in Pennsylvania?

Fortunately for Pennsylvanians, the state uses a flat tax system and is home to the second-lowest flat tax rate in America. As of 2019, residents can expect to put 3.07% of their state income toward state-level taxes. The state of Pennsylvania taxes 8 separate classes of income including:

  1. Income wages
  2. Interest earned
  3. Dividends
  4. Net profits from business operations
  5. Net gains or income accrued from rents, royalties, copyrights, and patents
  6. Net gains or income accrued from the dispositions of property
  7. Income earned through estates and/or trusts
  8. Lottery and gaming prizes won through the Pennsylvania Lottery
Annual 2019 Tax Burden ($75,000/yr income)
Income tax
Sales tax
Property tax
Total Estimated Tax Burden
Remaining Income = $68,197
Pennsylvania Tax Brackets

Pennsylvania is one of eight states that uses a flat income tax system. Unlike other states that required higher-income earners to pay a higher percentage of taxes, Pennsylvania sticks to a single 3.07% tax rate that applies to all Keystone State taxpayers.

Pennsylvania Personal Income Tax

Pennsylvania tax regulations and parameters are very different from the current federal tax laws. Under Trump’s Tax Cuts and Jobs Act, the federal government uses a progressive bracket system that ranges between 10% and 37%. Pennsylvania’s personal income tax rate sits at a fixed 3.07% rate.

Pennsylvanians should note that the state’s personal income tax does not provide for any personal exemptions or standard deductions. You may, however, reduce your total tax liability through eligible deductions, credits, and exclusions should your lifestyle and financial situation qualify.

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Pennsylvania Estimated Taxes

Estimated taxes provide an easy avenue for independent income earners as they work on a quarterly pay-as-you-go system that allows independent taxpayers to pay owed taxes throughout the year.

Self-employed workers, independent contractors, and those who do not have Pennsylvania income taxes withheld by an employer may not pay taxes the conventional way, but are still responsible for fulfilling their taxpaying duties. This applies to any individual who receives (or expects to receive) $8,000 in income from Pennsylvania sources.

If you meet these criteria, you must file Form REV-1630 or REV-1630F, or the Individual and Fiduciaries Estimated Tax Form. Those subject to paying estimated taxes should mark the following Form 500-ES due dates:

  • 1st quarter: April 15th
  • 2nd quarter: June 15
  • 3rd quarter: September 15
  • 4th quarter: January 15 (of the next calendar year)

Failure to comply or pay on-time could result in burdensome penalty charges, so it’s imperative that independent earners stay on top of their tax duties. Need some guided assistance as you figure out how much you owe to the state of Pennsylvania? Contact one of our tax professionals today to gain the peace of mind you need this tax season!

Pennsylvania Capital Gains Tax

Capital gains tax is a government-mandated fee levied on the profits accrued from the sale of certain assets, be it stock investments, land parcels, real estate property, and/or personal items. Capital gains must be reported to the federal government, but are not always required on state-level income tax returns. Pennsylvania, for example, makes no provisions for capital gains.

On the contrary, the federal government taxes capital gains at rates ranging between 0-15% contingent upon the individual taxpayer’s income bracket. Be sure to carefully assess your tax liability gleaned from capital gains before sending your return to the IRS.

Pennsylvania State Sales Tax
Pennsylvania’s standard sales tax rate is 6%, however depending on your county or municipality, the total tax rate can reach as high as 8%. Local Pennsylvania jurisdictions have the right to impose another sales tax in addition to the state standard. Fortunately there are only two local sales tax rates in Pennsylvania—residents of Allegheny County and Philadelphia can expect to pay and added 1% and 2% respectively. Within the Keystone State, sales tax applies to a variety of consumer products including prepared foods, expensive clothing, and more. Pennsylvanians can enjoy tax-free purchases on groceries, regular clothing, and prescription and non-prescription drugs.
Pennsylvania Excise Tax
What are excise taxes?

Often referred to as “indirect taxes”, excise taxes are legislated tarifs on specific goods. Unlike sales tax, excise taxes are charged to the producer or the vendor, not directly to the consumer. Though the indirect nature of this tax doesn’t free the consumer from a higher-cost liability. Excise taxes are typically reflected in the sale price of the taxable product, so you won’t see the added cost plainly listed on a purchase receipt.

Excise taxes are charged by the federal and state governments and apply to a vast array of products and services ranging from cell phone plans and vehicle registration to adult beverages and firearms. Excise taxes intended to deter consumers from engaging in more societally harmful activities are called “sin taxes”. Common product examples of where these “sin taxes” apply include: alcohol, tobacco, and gambling. Let’s break down how these sin taxes may be affecting your pocket.

Alcohol excise tax in Pennsylvania

The state of Pennsylvania collects excise tax on three major types of alcohol found in your local liquor store— beer, wine, and liquor. Each category comes with it’s own tax rate, so you may be paying extra for your libation of choice. You can expect to pay the following tax rates on your favorite alcoholic beverages:

Tobacco excise tax in Pennsylvania

Tobacco products are subject to both state and federal excise taxes. Much like alcohol excise taxes, tobacco excise taxes are not directly paid by the consumer, but are reflected in the final sale price of cigarettes, cigars, and other tobacco products.

The state of Pennsylvania is home to one of the highest cigarette taxes in the nation, ranking 8th highest out of the 50 states. As of 2019, cigarettes sold within Pennsylvania are taxed at $2.60 per pack of 20 cigarettes, or $0.13 per stick.

Gas tax in Pennsylvania

With the sprawling charm of Pennsylvania’s four seasons, there is plenty of appeal to owning a car in in the heart of the northeast. The cost of filling up your gas tank, however, may be an important consideration to take before packing up your gas-guzzler.

Pennsylvania gas excise tax rate is the highest in the country at a sizable $0.57 per gallon. For those who fill their tanks up with diesel fuel, you can expect a $0.74 excise tax factored into your final price at the pump.

Pennsylvanias can thank Act 89, also known as the transportation bill, for increasing the financial need carved out for infrastructure development and improvement which effectively called for raised excise gas tax costs.

Pennsylvania State Property Tax

The state of Pennsylvania does not collect or levy taxes on real estate or personal property. The assessment and collection of property taxes are reserved for local governments which are broken down by counties, municipalities (townships, boroughs, and cities), and school districts. All three districts have the right to levy real estate or property taxes, so when tax season approaches, you’ll need to know which county, school district, and municipality you reside in.

In essence, the property tax rate you pay is entirely dependent on your zip code— for example, residents living within Monroe county can expect to pay 2.41% in property tax, while Sullivan county residents will only pay a 0.95% rate.

Depending on your county, your property may be assessed by its current market value or a percentage of the current market value.

Pennsylvania generously offers a Property Tax/Rent Rebate Program which is available to qualified seniors and permanently disabled citizens. Funded by the Pennsylvania Lottery and administered by the Pennsylvania Department of Revenue, this program aims to assist qualifying taxpayers by issuing a maximum standard rebate of $650. Qualifying homeowners can even boost that amount to $975 in supplemental rebates.

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Pennsylvania Inheritance and Estate Taxes

Inheritance and estate taxes are levied and collected by both federal and local governments and effectively aim to tax the property, money, and physical assets received by an individual taxpayer from a decedent. Of the 50 states, only six states enforce strict inheritance tax laws. This includes Pennsylvania.

In fact, Pennsylvania taxpayers who have recently come into money or property from a descendent may not need to pay any inheritance or estate taxes.

Here’s how the Pennsylvania Department of Revenue determines which inheritors owe taxes and which do not:

  • 0% on transfers to a surviving spouse or to a parent from a child aged 21 or younger
  • 4.5% on transfers to direct descendants and lineal heirs
  • 12% on transfers to siblings
  • 15% on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax
Pennsylvania State Tax Credits

Pennsylvania’s Department of Revenue is home to a lengthy list of available tax credits, however, the majority of these credits are only applicable to businesses. There are a few that individual taxpayers may qualify for which include:

Historic Preservation Tax Credit: The Historic Preservation program provides tax credits for qualified taxpayers who have begun or completed the rehabilitation of a qualified historic structure. The property must be first approved by the PA Historical & Museum Commission and must be rehabilitated into an income-producing property to be eligible.

Research & Development (R&D) Tax Credit: The R&D tax credit is available to businesses and individuals who perform qualified research in Pennsylvania. It’s aim is to encourage Pennsylvania’s most brilliant minds and businesses to conduct research and push the bill on innovation. This credit is similar to a credit available through IRS tax code Section 41. The R&D tax credit equals 10% of the qualifying research expenses that surpass the base amount.

Neighborhood Assistance Program: Designed to encourage taxpayers to contribute to neighborhood organizations and charitable programs within the commonwealth, the Neighborhood Assistance Program rewards taxpayers who engage in activities that nurture economic development in impoverished areas.

Mixed-Use Development Tax Credit Program: The Mixed-Use Development tax credit program was created with the intention to help communities address affordable housing shortages and support business growth. This tax credit initiative effectively allows developers access to funds for construction or rehabilitation projects that promote the creation of affordable housing and business in the same structure.

At Community Tax, we strive to find every potential tax credit for which you may be eligible and work hard to reduce your final tax bill, one dollar-for-dollar credit at a time.

Pennsylvania State Tax Deductions

While state tax deductions are very similar to tax credits, the two accomplish different things. Instead of reducing your tax bill dollar-for-dollar, tax deductions reduce your overall taxable income. However, in the state of Pennsylvania, there are no state-level deductions available to taxpayers. This means that there are also no federal tax deductions allowed on any Pennsylvania tax returns.

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Calculating Your Pennsylvania Tax Refund

Tackling tax season alone is tricky, and it’s even trickier to figure out what your take-home pay will be after taxes. Pennsylvania employers are legally required to withhold federal and state income taxes from your paychecks, as well as Federal Insurance Contributions Act (FICA) taxes. Depending on your PA zip code, you may be subject to pay local income taxes.

Fortunately, when you choose Community Tax, you gain access to our Pennsylvania tax calculator. Step into tax season with this user-friendly and easy to navigate calculator— all you need to do is enter the following information:

  • Adjusted gross income (AGI)
  • Zip code
  • Number of exemptions
  • Number of dependents
  • List of tax credits or deductions you qualify for

Assembling your documents and crunching numbers can leave you feeling less than confident in your final calculations. Gain the assurance you need by checking out our many tax tips and tax preparation services to ensure the process is as smooth-sailing as possible.

How to Pay Pennsylvania Taxes

The Pennsylvania Department of Revenue has embraced the digital age and processes all state-level tax returns and payments online. While Pennsylvanias have the option to file manually with pen and paper, the Department of Revenue encourages and incentivizes the use of their online system: PA e-File. The E-file system accepts two payment forms including:

  • Electronic Funds Transfer (ETF)
  • Credit card (MasterCard, Visa, American Express, or Discover)

Using the Pennsylvania Department of Revenue’s hub site, you can do everything from filing an appeal to tracking the status of your refund.

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Pennsylvania Tax Facts
  • The Keystone State tacks on an additional 18% “Flood Tax” for every bottle of alcohol sold. Originally created and enforced to help rebuild Johnstown after the devastating flood of 1936, the Flood Tax is still alive and well 83 years later.
  • Pennsylvania has a tax on coin-operated vacuum machines at gas stations
  • Pennsylvania, Iowa, and New Jersey strangely exempt pumpkins from sales tax but only if they are purchased with the intention of consumption rather than holiday carving.
Summary of Federal Taxes

Pennsylvania taxpayers should keep in mind that every time tax season rolls around, they are responsible for filing and paying both state and federal taxes by April 15th of every fiscal year. Regardless of whether you're changing your state of residence, your federal tax obligations will always remain so long as you live in the United States. Fortunately, because the federal tax code applies to all American taxpayers, you won’t have to worry about learning any new tax codes to fulfil your civic duty.

In order to escape the wrath of the dreaded IRS, you’ll want to handle all data and number crunching with extreme meticulous care. You may even consider outsourcing the heavy-lifting to a tax professional to gain the assurance you need to submit with confidence. Count on Community Tax to get you the most out of the upcoming tax season.

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Summary of Federal Taxes
Remember that Pennsylvania state taxes are separate from federal state taxes and that the Pennsylvania tax brackets are different at a state level.
Tax Considerations

This information is current as of 2019. Taxpayers should consider special circumstances which could impact their individual state tax return.

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