Pennsylvania taxes

Pennsylvania taxes personal income at a flat 3.07%, and retirement income is not taxed once you have retired. A sole proprietor owes no separate business tax. An LLC files a $7 annual report, required for the first time in 2025. Partnerships and S corporations are not taxed themselves, but they must withhold tax for owners who live outside Pennsylvania. C corporations pay 7.99% corporate net income tax for 2025.

Personal income tax

Pennsylvania residents file Form PA-40. Every dollar is taxed at 3.07%, for every filing status. There is no standard deduction and no personal exemption.

Pennsylvania does not start from your federal return. It sorts income into eight classes and adds only the ones above zero, so a loss in one class, such as a business, can never reduce another, such as wages. Money you put into a 401(k) is taxed here even though it is not taxed federally. Retirement income, including Social Security, is not taxed once you have retired.

Lower incomes get Tax Forgiveness on Schedule SP, which can cancel some or all of the tax. Separately, nearly every Pennsylvania municipality and school district taxes earned income on its own return, filed with a local collector rather than on Form PA-40.

Return

Form PA-40

Rate

3.07% on all taxable income

Standard deduction or exemption

None

Tax Forgiveness

Full forgiveness up to $6,500 of eligibility income unmarried or $13,000 married, plus $9,500 per dependent child, then 10% less for each $250 above

Deductions allowed

529 contributions up to $19,000 per beneficiary for each taxpayer, ABLE contributions up to $19,000, student loan interest up to $2,500, and medical and health savings account contributions

Use tax on untaxed purchases

6%, or 7% in Allegheny County and 8% in Philadelphia

Local earned income tax

Separate return with your local collector

Sole proprietor

A sole proprietor with no LLC owes Pennsylvania nothing at the business level. The annual report is only for registered entities, so you file none and pay no fee.

Your business profit is taxed on your own Form PA-40 at 3.07%. A business loss cannot reduce your wages or other income. Pennsylvania does not allow federal bonus depreciation, so it is added back, and you keep a separate Pennsylvania depreciation schedule. Section 179 expensing follows the federal limit for property placed in service since 2023.

Single-member LLC

Starting 1 January 2025, every Pennsylvania LLC files an annual report with the Department of State and pays $7, whatever it earned. It replaced a report filed once a decade, so an LLC that has existed for years has never filed one before. It is due by 30 September (the window opens 1 January).

The fee is small, but skipping it is not. Pennsylvania will dissolve a domestic LLC that does not file, starting with reports not filed in 2027, and a foreign LLC loses its registration. The LLC's profit is taxed on your own Form PA-40.

Partnership

A Pennsylvania partnership files Form PA-20S/PA-65, an information return. The partnership pays no Pennsylvania income tax itself; the profit is taxed on the partners' own returns.

If a partner lives outside Pennsylvania, the partnership must withhold Pennsylvania tax on that partner's share, report it on Schedule NW, and pay any shortfall itself when it files. It does not withhold for another business, for a Pennsylvania resident, or on interest, dividends or gains on selling shares.

S corporation

A Pennsylvania S corporation files Form PA-20S/PA-65, the same information return partnerships use. The corporation pays no Pennsylvania income tax itself; the profit is taxed on the shareholders' own returns.

If a shareholder lives outside Pennsylvania, the corporation must withhold Pennsylvania tax on that shareholder's share, report it on Schedule NW, and pay any shortfall itself when it files.

C corporation

A C corporation files Form RCT-101 and pays corporate net income tax at 7.99% of its Pennsylvania income for 2025. A corporation selling into other states counts only its Pennsylvania share, measured by Pennsylvania sales over total sales.

The rate is dropping every year: 7.49% in 2026, down to 4.99% in 2031. Check the year before reusing an old figure.

Return

Form RCT-101

Corporate net income tax

7.99% for 2025

Rate schedule

7.99% in 2025, 7.49% in 2026, 6.99% in 2027, 6.49% in 2028, 5.99% in 2029, 5.49% in 2030, 4.99% in 2031

Multi-state profit

Pennsylvania sales over total sales

Estimate your state tax

Pick your business type and enter this year's numbers to see the state business tax Pennsylvania charges. It assumes all your sales are in Pennsylvania.

An estimate for planning, not tax advice.

Sources

• Pennsylvania 2025 PA-40 Instruction Booklet (PA-40 IN)
• Pennsylvania 2025 Form PA-40
• Pennsylvania 2025 Schedule SP, Tax Forgiveness
• Pennsylvania Personal Income Tax Bulletin 2023-02, Section 179 Property Deduction
• pa.gov PA Personal Income Tax Guide, Pass Through Entities
• pa.gov 2025 PA Schedule NW, Nonresident Tax Withheld
• pa.gov REV-413 P/S, estimating nonresident withholding by partnerships and PA S corporations
• pa.gov Corporation Tax Rates (read 2026-08-13)
• pa.gov Corporate Net Income Tax
• pa.gov 2025 PA Corporate Net Income Tax Report RCT-101 and REV-1200 instructions

Last reviewed August 2026.