How Pennsylvania State Income Tax Works (2026)
Pennsylvania has one of the lowest flat state income tax rates in the nation at 3.07%. The flat rate applies to all taxable income with no brackets and no standard deduction.
Unlike most states, PA categorizes income into eight specific classes for taxation. Importantly, PA does NOT allow you to deduct 401(k) contributions from state taxable income — only HSA and health insurance are pre-tax for PA purposes.
Local Earned Income Tax (EIT)
In addition to the 3.07% state tax, most Pennsylvania municipalities impose a Local Earned Income Tax (EIT). Rates vary significantly:
| City / Area | EIT Rate |
|---|---|
| Philadelphia (Resident) | 3.75% |
| Philadelphia (Non-Resident) | 3.44% |
| Pittsburgh | 3.00% |
| Reading | 2.50% |
| Allentown / Erie | 2.00% |
| Bethlehem | 1.65% |
| Harrisburg / Scranton | 1.50% |
| Most Suburban Townships | 1.00% |
Your EIT rate is determined by your home municipality, not where you work. If you live in a 1% suburb but work in Philadelphia, you pay your home rate (1%), not Philadelphia's 3.75%.
PA Tax Break for Retirees
Pennsylvania is one of the most retirement-friendly states. PA exempts from state income tax:
- Social Security benefits — Fully exempt
- Public pensions — Federal, state, and military pensions
- Private pensions — Including most employer pensions
- 401(k) and traditional IRA distributions — For retirees 59½ or older
- Most annuities — Including life insurance and commercial annuities
A retiree with $80,000 in combined pension + 401(k) income pays $0 in PA state tax, vs $3,956 in Illinois or $4,800+ in NY State.
Pennsylvania vs Other States (2026)
| State / Location | $100K Net Take-Home |
|---|---|
| Texas / Florida (no state tax) | ~$78,500 |
| PA Suburban (3.07% + 1% EIT) | ~$74,700 |
| Pittsburgh (3.07% + 3% EIT) | ~$72,700 |
| Illinois (4.95% flat) | ~$73,400 |
| Philadelphia Resident (3.07% + 3.75%) | ~$71,950 |
| NYC Resident | ~$69,500 |
Frequently Asked Questions
Pennsylvania has a flat 3.07% state income tax rate for 2026 — one of the lowest in the nation. The 3.07% applies to all taxable income with no brackets. Unlike most states, Pennsylvania does not allow a standard deduction or personal exemption from the state income tax. However, PA exempts most retirement income.
Pennsylvania allows municipalities and school districts to impose a local Earned Income Tax (EIT), typically 1.0% to 3.9%. Philadelphia has the highest at 3.75% (residents) / 3.44% (non-residents). Pittsburgh residents pay 3.0%. Most suburban townships are 1.0%. Your EIT is determined by your home address, not your work address.
No — Pennsylvania is one of the most retirement-friendly tax states. PA exempts Social Security, pension distributions (public and private), 401(k) and IRA withdrawals (for retirees 59½+), and most annuity income from state tax. A retiree with $80K in pension and 401(k) income pays $0 in PA state tax, saving $2,500-$6,000/year vs other states.
Pennsylvania's 3.07% state income tax is among the lowest flat-tax rates in the nation. Comparing $100K take-home: PA ~$75,500, IL ~$73,400, NY ~$73,000. However, Pennsylvania has high local EIT in cities (Philadelphia 3.75%, Pittsburgh 3.0%) which can offset the low state rate.
Sources & Methodology
- Pennsylvania Department of Revenue — 2026 withholding rates
- 72 P.S. § 7301 — Pennsylvania Income Tax Act
- Act 32 of 2008 — Local EIT administration
- IRS Publication 15-T (2026) — Federal withholding
- PA Department of Labor — 2026 SUI rate 0.07%
Calculator methodology reviewed by Benjamin Thomas, CPA, MST. EIT rates verified against PA Department of Community and Economic Development directory, January 2026.