Pennsylvania State Income Tax Overview

Pennsylvania, like many other states, has a state income tax that must be filed separately from the federal income tax return filed with the Internal Revenue Service (IRS).  This blog provides answer to common questions about state income tax for Pennsylvania, including how has to file, tax rates, and other filing information.

Taxes

Who has to file?

Pennsylvania state income taxes apply depending on whether you were a resident of the state for all of the year, part of the year, or none of the year.

Residents of Pennsylvania

Those who are residents of the state must pay state income tax on all income sources.  Pennsylvania includes in income any of the following:

  • Compensation
  • Interest
  • Dividends
  • Net profit from the operation of a business
  • Net gains from the disposition of property
  • Net gains from rents, royalties, patents, and copyrights
  • Income received from estates or trusts
  • Gambling and lottery winnings outside the state of Pennsylvania

Part-Time Residents of Pennsylvania

If you lived in Pennsylvania for only part of the year, state income tax is calculated in the following way:

  • For the portion of the year when you lived in Pennsylvania, state income tax is calculated based on all income sources (as defined above for residents of Pennsylvania).
  • For the portion of the year when you lived outside of Pennsylvania, state income tax is calculated based on any income from a Pennsylvania source, excluding income from interest, dividends, and gains on the sale of property.

Residents of Other States

If you earn income from a Pennsylvania source but your list outside of Pennsylvania, you must pay state income tax on the Pennsylvania income, excluding income from interest, dividends, and gains on the sale of property.

What is the tax rate?

For the 2011 tax year, Pennsylvania charges state income tax at a flat 3.07% of all income.

Are there tax deductions or credits to reduce the tax I pay?

Pennsylvania state income tax does not provide for a standard deduction or personal exemptions as is the case with federal income tax.  But Pennsylvania state income tax does all certain other deductions, credits, and exclusions.

Deductions

  • Unreimbursed expenses related to your occupation or employment, so long as such expenses are reasonable and necessary
  • Medical and health savings account contributions
  • Contributions to IRC Section 529 tuition programs

Credits

  • Income taxes paid to other states or countries
  • Tax Forgiveness for low income taxpayers
  • Tax credit programs for qualified applicants

Exclusions

  • Payments to IRC Section 125 plans for hospitalization, sickness, disability, and death
  • Capital gains from the sale of a principal residence
  • Personal use of employer-owner property

When do I have to file my taxes?

The filing date for Pennsylvania state income tax is aligned with the date for filing federal income tax, which is April 17, 2012, for the 2011 tax year.  Pennsylvania allows for a six-month extension on the filing date, possibly longer if the taxpayer is outside the United States.  Even if you receive a filing extension for your state income tax, you must still pay any tax owed by the original filing date.

How do I file?

Pennsylvania state income fax can be filed by mail or online via Pennsylvania’s padirectfile program.

Can a tax attorney help me?

There are tax attorneys who specialize in the calculation and filing of state income tax for Pennsylvania.  It is often wise to work with such a tax attorney who knows the laws of your state, to be sure your state income tax is calculated and filed properly.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.