Pennsylvania Income Tax Information
- As of 2010, the personal income tax rate in Pennsylvania is 3.07 percent. Unlike the federal personal income tax, the rate is not progressive but applies to all taxpayers regardless of income. Eight types of income exist in Pennsylvania: compensation, dividends, profits, income from selling property, trust and estate income, interest, gambling winnings and net gains like royalties and rents.
- Pennsylvania taxpayers can reduce the total amount of taxable income they have by deducting expenses that are "ordinary, actual, reasonable, necessary and directly related" to the taxpayer's job. Specifically, Pennsylvania allows three deductions from personal income: money deposited into a medical savings account, contributions to health savings accounts, and contributions to tuition savings account under Internal Revenue Code Section 529.
- In addition to deductions, income tax credits can reduce Pennsylvania taxpayers' liability. The Pennsylvania Department of Revenue credits income taxes that residents pay to other states or foreign countries. Low-income families can also receive special credits. For example, a four-person family that makes less than $34,250 qualifies for tax credits that basically make its household tax liability zero. A single parent who has two children and makes less than $27,750 would owe no taxes based on the tax forgiveness program for low-income families.
- Exclusions can also lower the amount of taxes Pennsylvania taxpayers must pay by excluding certain income from taxation. Qualified payments to cafeteria plans under Internal Revenue Code Section 125 with regard to hospitalization are excluded. If a homeowner sells her principal place of residence in Pennsylvania and makes a profit from the sale, that income (referred to as "capital gains") does not count as taxable income.
- Pennsylvania income taxes are due by April 15 each year. Taxpayers can request a six-month extension with the Department of Revenue. Failure to pay Pennsylvania income tax by April 15 without the Department of Revenue granting an extension will result in penalties and interest.
- Please contact a qualified tax professional to find out what obligations you may have with regard to Pennsylvania income taxes.