Pennsylvania State Taxes
The Commonwealth of Pennsylvania imposes several major taxes including Personal Income Tax, Sales/Use Tax, and Corporate Tax. Local taxes, such as Property Taxes, are enforced by counties, municipalities, and school districts.
Pennsylvania State Tax ? Personal Income Tax
Pennsylvania’s personal income tax has a flat rate of 3.07% for any individual who earns over $33 of taxable income.
The Pennsylvania Department of Revenue divides income into 8 classes:
- Gross Compensation/Wages
- Net income or loss from the operation of a business, profession, or farm
- Net gain or loss from the sale or dispositions of property
- Net income or loss from rents, royalties, patents, and copyrights
- Net income or loss from estates or trusts
- Gambling and lottery winnings (other than Pennsylvania State Lottery winnings)
Losses and/or gains cannot be carried from year to year, and changes in one class of income will not necessarily affect another class of income. There are also no standard deductions or personal exemptions. However, certain other tax credits, tax deductions, and exclusions may help reduce an individual’s tax liability.
The PA Department of Revenue collects personal income tax in 3 ways:
- Estimated and final payments from individuals
- Employer withholding
- Estimated withholding from nonresident partners or shareholders by partnerships and S corporations
Earned Income Tax
Pennsylvania localities (counties, municipalities, and school districts) may impose their own income tax in addition to the state income tax. This is called the ‘Earned Income Tax’ (or Wage Tax) and applies only to earned income. There is a 1% limit for these taxes ? except in Home Rule municipalities (like Philadelphia, Pittsburgh, and Scranton) which do not have to comply with a minimum tax rate.
Pennsylvania personal income tax returns are due by midnight on April 15th. Penalties and late fees are enforced for late returns, though a six6month Extension of Time to File (Form REV-276) may be granted. This option is not an extension of time for payment; it only covers filing, so the extension application must be submitted with any tax that is due. Form REV-276 should be filed as early as possible so the Department of Revenue can process it before the original due date of April 15th.
If you need to correct a mistake you made on your income tax return, you must file an amended PA return within 30 days. There is no special form for this ? you should use a PA tax return from the same tax year and simply fill in the oval for ‘Amended Return’ or write Amended Return on the top of the form. Mail this with the additional tax due (and any late fees that apply) to the PA Department of Revenue.
Pennsylvania State Tax ? Corporate Tax
Corporate Net Income Tax
Pennsylvania imposes a Corporate Net Income Tax rate of 9.99% for the privilege of conducting business or owning property in the state. The PA Department of Revenue uses the term ‘corporation’ in the same way it is used for federal tax purposes. While this tax is based on federal taxable income, Pennsylvania does not apply federal tax deductions. Certain corporations, such as non-profit organizations, are exempt. Corporate net income tax is reported using Form RCT-101.
Corporate Loans Tax
In addition to the corporate net income tax, domestic and foreign corporations operating in Pennsylvania must also withhold the Corporate Loans Tax. This tax has a rate of 4 mills (1 mill is equal to one-tenth of a cent, or one-thousandth of a dollar) on each dollar of indebtedness (e.g., scrip, bonds, and certificates) owed to PA residents by corporations. This tax can be reported using Form RCT-132
Pennsylvania State Tax ? Sales & Use Tax
Pennsylvania has a 6% state sales tax rate imposed on the sale, consumption, rental, or use of taxable goods and services. The counties of Philadelphia and Allegheny impose an additional 1% local sales tax for taxable goods/services originating from those localities.
Taxable items include computers, appliances, sports equipment, office equipment, books, furniture, and maintenance services. Major items that are exempt from sales tax include most food (purchased from a grocery store), most clothing apparel, prescription medications, textbooks, sales for resale, and residential heating fuels (e.g., oil, gas, and electricity).
The ‘use tax’ has the same rate as the sales tax (6% state rate, plus 1% local tax if located in Philadelphia or Allegheny County). It applies to the same items that are subject to the sales tax but were not charged the appropriate tax amount. The use tax is considered a personal responsibility of the taxpayer, and it is paid directly to the PA Department of Revenue. In general, the use tax affects purchases made by the Internet or through telephone and mail-order catalogs. Individuals filing a Use Tax Return can use Form PA-1.
Pennsylvania State Tax ? Property Tax
Property Tax (or Real Estate Tax) is an enduring staple of the Pennsylvania tax system. It is enforced on the local level by counties, municipalities, and school districts ? and depending in its location, a property may be subject to taxes from all 3 jurisdictions.
Local governments impose taxes on real property, which includes land and buildings (not cars or other personal property). Exempt from these taxes are places of burial, places of worship, government property, and educational or charitable establishments.
Property tax is based on millage rates (1 mill is equal to one-tenth of a cent, or one-thousandth of a dollar) that vary depending on locality. In Pennsylvania, tax rates cannot exceed 30 mills on a property’s assessed value (unless granted special permission by the courts).
Property Tax Relief
The PA Department of Revenue offers a Property Tax/Rent Rebate program to qualified senior citizens and persons with disabilities. Funding for this program comes from the Pennsylvania Lottery, and it allows eligible taxpayers to receive a reimbursement of up to $650 per year for property taxes or rent paid in the previous year. To apply for this rebate, file Form PA-1000.
Pennsylvania State Tax Forms
Form PA-40 (Pennsylvania Income Tax Return)
Form PA-40ES (Declaration of Estimated Personal Income Tax)
Form REV-276 (Application for Extension of Time to File)
Form PA-1 (Use Tax Return)
Form PA-8453 (Pennsylvania Individual Income Tax Declaration for Electronic Filing)
Form PA-V (Personalized Payment Voucher)
Pennsylvania State Tax Resources
Pennsylvania Department of Revenue: www.revenue.state.pa.us
PA state tax forms and publications: www.revenue.state.pa.us/forms publications
PA Personal Income Tax ‘e-Services’ center: www.doreservices.state.pa.us/Individual
PA Department of Revenue Online Customer Service Center:
File PA personal income taxes using ‘pa.direct.file’ online: padirectfile.state.pa.us
‘Personal Income Tax’ brochure: www.revenue.state.pa.us/document/rev-581
Check the status of your PA state tax refund: www.doreservices.state.pa.us/Individual/Refund
Pennsylvania’s Tax Freedom Day is April 14th.