Pennsylvania has one of the lowest flat state income tax rates in the country at 3.07%. However, many municipalities add local income taxes (called Earned Income Tax or EIT) that can add 1% to 3.8% on top of the state rate.
Pennsylvania Flat Tax Rate
| Taxable Income | Tax Rate |
|---|---|
| All earned income | 3.07% |
Pennsylvania's flat rate applies to all taxable income with no brackets. This is one of the simplest state tax systems in the country. Based on PA Department of Revenue guidelines.
Local Earned Income Tax (EIT)
Pennsylvania allows municipalities and school districts to levy local income taxes. These vary significantly:
| Location | Local EIT Rate | Combined Rate |
|---|---|---|
| Philadelphia | 3.79% (residents) | 6.86% |
| Pittsburgh | 3% | 6.07% |
| Scranton | 3.4% | 6.47% |
| Reading | 3.6% | 6.67% |
| Typical suburban municipality | 1% - 2% | 4.07% - 5.07% |
Philadelphia's wage tax is the highest local income tax in the state. Non-residents who work in Philadelphia pay 3.44% (slightly lower than residents).
What You'll See on Your Paystub
A Pennsylvania worker's paystub includes federal income tax withholding plus state and local deductions:
| Deduction | Rate | Notes |
|---|---|---|
| Federal Income Tax | Varies | Based on W-4 and income |
| Social Security | 6.2% | Up to $181,200 wage base |
| Medicare | 1.45% | No wage limit |
| PA State Income Tax | 3.07% | Flat rate on all income |
| Local EIT | 0% - 3.8% | Varies by municipality |
| Local Services Tax (LST) | Up to $52/year | Flat annual tax, often deducted per paycheck |
The Local Services Tax (LST) is a flat annual fee (up to $52) that funds local emergency services. It's usually split across your paychecks as $1-2 per pay period.
No Standard Deduction
Pennsylvania does not offer a standard deduction. You pay 3.07% on all taxable compensation from dollar one. However, Pennsylvania has a narrower definition of taxable income than the federal government:
- Unreimbursed business expenses are deductible
- Contributions to 401(k), 403(b), and other retirement plans reduce taxable income
- Health insurance premiums paid by employees are deductible
Philadelphia Workers
Philadelphia has the highest local wage tax in the state:
- Residents: 3.79% city wage tax
- Non-residents: 3.44% city wage tax for those who work in Philadelphia but live elsewhere
- Combined with state tax, Philadelphia residents pay 6.86% total
Philadelphia Wage Tax Credit
If you live outside Philadelphia but work there, you may receive a credit against your home municipality's EIT for the Philadelphia wage tax paid.
Some employers allow hybrid or remote work arrangements. Days worked outside Philadelphia are not subject to the Philadelphia wage tax—only the state tax and your home municipality's EIT.
Pittsburgh Workers
Pittsburgh has a 3% local income tax:
- Combined with state tax: 6.07% total
- Allegheny County residents pay the same rate throughout the county
- Major employers: UPMC, PNC, U.S. Steel, Carnegie Mellon
Reciprocity Agreements
Pennsylvania has reciprocity agreements with several neighboring states:
- Indiana: PA residents working in IN pay PA taxes only
- Maryland: PA residents working in MD pay PA taxes only
- New Jersey: PA residents working in NJ pay PA taxes only
- Ohio: PA residents working in OH pay PA taxes only
- Virginia: PA residents working in VA pay PA taxes only
- West Virginia: PA residents working in WV pay PA taxes only
Pennsylvania's extensive reciprocity agreements benefit the many workers who cross state lines. File an exemption form with your employer if you work in a reciprocity state.
Retirement Income
Pennsylvania is one of the most tax-friendly states for retirees:
- Social Security: Fully exempt
- Pension income: Fully exempt (after age 59½)
- 401(k) and IRA distributions: Fully exempt (after age 59½)
- Military retirement: Fully exempt
Pennsylvania does not tax any retirement income for those who have reached retirement age. This makes it extremely attractive for retirees, despite the lack of a standard deduction for workers.
Pennsylvania vs. Neighboring States
| State | Tax Structure | Top State Rate |
|---|---|---|
| Pennsylvania | Flat + Local | 3.07% + local |
| New Jersey | Progressive | 10.75% |
| New York | Progressive + Local | 10.9% + NYC |
| Ohio | Progressive | 3.5% |
| Maryland | Progressive + Local | 5.75% + local |
| Delaware | Progressive | 6.6% |
| West Virginia | Progressive | 5.12% |
Comparing Take-Home Pay
Here's how a $75,000 annual salary compares (using suburban PA vs. neighboring states):
| Location | Effective Rate | Annual State/Local Tax |
|---|---|---|
| PA (suburban, 1.5% local) | 4.57% | ~$3,430 |
| PA (Philadelphia) | 6.86% | ~$5,145 |
| New Jersey | ~4.5% | ~$3,375 |
| Delaware | ~5.2% | ~$3,900 |
Outside of major cities, Pennsylvania's combined tax burden is competitive with neighboring states. The Philadelphia wage tax significantly increases the burden for city residents and workers.
Key Takeaways
- Pennsylvania's state rate is a flat 3.07%—one of the lowest in the nation
- Local EIT taxes add 1-3.8% depending on municipality
- Philadelphia has the highest local wage tax at 3.79% for residents
- Retirement income is fully exempt after age 59½
- Reciprocity with many neighboring states simplifies cross-border work