Pennsylvania State and Local Taxes: Ultimate Guide

Pennsylvania’s tax system is somewhat unique, including being one of only a few states to have a flat income tax rate. 

While the state sales tax rate and income taxes are relatively low, a complex system of local levies and a high corporate income tax contribute to the overall tax burden. However, there are certain tax breaks in place to ease the tax burden. 

In this article, we’ll provide a detailed breakdown of Pennsylvania state and local taxes, including property taxes and inheritance tax requirements. We will also discuss tax breaks and other important considerations for individuals and businesses in the Keystone State. 

Overview of Pennsylvania State Taxes

We’ll begin with an overview of different payroll taxes in the state before we explore each of them in more detail:

• Pennsylvania imposes a 3.07% flat income tax on taxable income. With a flat rate, all earners pay the same percentage, regardless of income level. 
• The corporate net income tax is 7.99% through December 2025 and is being gradually reduced from its previous 9.99%, which was one of the highest in the country. 
• Pennsylvania’s state sales tax rate is 6.00%, with an average combined state and local sales tax rate of 6.34%.
• The state’s property tax rate averages 1.41%, though it varies significantly by location. 
• Pennsylvania is also one of the few states with an inheritance tax, which applies to certain beneficiaries based on their relationship to the deceased.

Income Tax in Pennsylvania

Pennsylvania operates under a flat tax system, meaning every resident pays the same 3.07% income tax rate on taxable income. 

According to the Commonwealth of Pennsylvania, there are eight classes of taxable income:

1. Compensation
2. Interest
3. Dividends
4. Net profits from the operation of a business, profession, or farm
5. Bet gains or income from the dispositions of property
6. Net gains or income from rents, patents, royalties, and copyrights
7. Income derived through estates or trusts
8. Gambling and lottery winnings, including cash prizes from the Pennsylvania Lottery

Unlike many other states, Pennsylvania does not offer a standard deduction or exemption, and deductions are extremely limited. This means lower-income residents may pay a higher effective tax rate than they would in a state with a progressive tax system.

Instead, the state offers certain tax breaks to offset these costs, including:

• Tax Forgiveness Credit: Relief for low-income taxpayers.
• Dependent Care Tax Credit: A refundable credit for childcare expenses.
• Sales Tax Exemptions: Pennsylvania does not tax groceries (including candy and gum), clothing, and prescription drugs, benefiting low-income households.

Corporate Income Tax in Pennsylvania

Pennsylvania has an interesting corporate tax history, and from 1995 to 2022, it had the second-highest corporate income tax rate in the country at 9.99%. 

When Pennsylvania Act 53 of 2022 was passed, the state's corporate net income tax rate was lowered to 8.99% as of January 1, 2023. Each year, it will lower by 0.5% until it reaches 4.99%, currently scheduled to occur in 2031.

As of 2025, the rate is 7.99%, and on January 31, 2026, it will lower again to 7.49%. 

Local Taxes in Pennsylvania

Pennsylvania taxes include two types of local taxes: Local earned income tax (EIT) and Local Services Tax (LST).

Additionally, Pennsylvania has over 3,000 local taxing jurisdictions, including municipal and school district income taxes. 

Local earned income tax (EIT) rates range from 0.5% to 3.75% (in Philadelphia), which means some taxpayers face a combined state and local tax rate as high as 6.98%.

Pennsylvania’s decentralized tax system means employers and individuals must track multiple tax rates depending on where they live and work. This complexity makes payroll compliance particularly challenging.

Learn more about the importance of location accuracy in payroll in this article.

Property Taxes in Pennsylvania

With an average property tax rate of 1.41%, Pennsylvania has the 12th highest rate in the country. 

Again, this varies by county. For example, a 1% local tax is added to purchases made in Allegheny County, and a 2% local tax is added to purchases made in Philadelphia. 

These property taxes serve important purposes, as they primarily fund schools, municipalities, and county governments. 

To ease the tax burden, Pennsylvania offers a Property Tax/Rent Rebate Program for seniors, widows or widowers over age 50, and adults with disabilities. 

This rebate, which is supported by funds from the Pennsylvania Lottery and gaming,​ can be as high as $1,000 or as low as $380, depending on income levels. 

For example, if your income is between $0 to $8,270, you could be eligible for the highest rebates of $1,000. On the other end of the spectrum, if your income is between $18,611 and $46,520, your maximum rebate would be $380. 

In addition to this program, there are supplemental rebates for property owners with income under $31,010 whose property taxes exceed 15% of their income. 

With location-based qualifications, to be eligible for supplemental rebates, you must live in one of these three high-tax areas:

• Philadelphia
• Scranton
• Pittsburgh

There are also age requirements for these rebates, including being a widow or widower aged 50 and older or a person with disabilities aged 18 or older. These supplemental rebates range between an extra $190 to $500 per year, depending on income.

Check your local county and municipality for additional exemptions or credits.

Filing and Payment Deadlines in Pennsylvania

The Pennsylvania state tax return is due April 15, 2025, the same as the federal tax deadline. Taxpayers who need more time can apply for a six-month extension, moving the deadline to October 15, 2025.

However, taxpayers must still pay any taxes owed by April 15 to avoid penalties and interest.

For self-employed individuals and those with non-wage income, quarterly estimated tax payments are due on the standard IRS schedule (April 15, June 15, September 15, and January 15 of the following year). 

Businesses also need to keep local tax filing requirements in mind, and these vary by jurisdiction.

Tax Burden in Pennsylvania

According to estimates for 2024, Pennsylvania’s tax burden is 8.4%. For reference, the state with the country’s lowest tax burden is Alaska at 4.9%, and the state with the highest tax burden is New York at 12%.

According to the 2025 State Tax Competitiveness Index from the Tax Foundation, Pennsylvania ranks 34th overall.

Inheritance and Estate Taxes in Pennsylvania

Pennsylvania is one of 12 states and the District of Columbia that imposes additional estate taxes and one of six states that levies inheritance taxes.

As outlined by the Commonwealth of Pennsylvania, these tax rates depend on the relationship between the deceased and the beneficiary:

• 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 does not have a separate estate tax, but the inheritance tax can still significantly affect estate planning. Beneficiaries should consider strategies to minimize this tax burden where possible.

Summary: Pennsylvania Taxes

As we’ve seen, Pennsylvania’s tax system is complex, with a mix of flat income taxes, high corporate taxes, and local tax variations. 

Whether you're a developer building payroll software or a product manager ensuring compliance, Symmetry’s payroll tax APIs and automation tools take the guesswork out of Pennsylvania payroll taxes.

Get a demo today and see how Symmetry can streamline tax calculations, ensuring accuracy and compliance for every paycheck.

Taxes in Pennsylvania: Frequently Asked Questions

Find more questions and answers below to learn more about taxes in Pennsylvania. 

Here are three more articles to check out next: 

• Navigating 2025 Payroll Tax Changes: How Providers Can Prepare for Compliance
• How to Navigate Payroll Tax Compliance When Scaling US and Canada
• 6 Common Payroll Tax Problems and How to Solve Them