Pennsylvania Income Tax Guide 2026: 3.07% Flat Rate + Philadelphia Wage Tax

Pennsylvania's income tax system is unusual in its simplicity: a single flat 3.07% rate that applies to virtually all earned income, with no brackets, no standard deduction in the federal sense, and no personal exemption. What you earn is largely what you're taxed on — and at 3.07%, Pennsylvania's state rate is among the lowest flat rates in the country.

The complexity in Pennsylvania comes from local taxes. Every municipality in the state levies a Local Earned Income Tax (EIT), ranging from 1% in most suburban communities to 3.75% in Philadelphia. For residents of Philadelphia — the largest city in the state — the combined state-plus-city burden of 6.82% is significant. For the rest of Pennsylvania, the state-plus-local burden typically runs 4.07%–5.07%, still moderate by national standards. Pennsylvania also stands out on retirement income: the state exempts virtually all retirement distributions (401(k), IRA, pension) after age 59.5, making it one of the most retirement-friendly states in the US for income tax purposes.

Pennsylvania's 3.07% Flat Rate: One of the Lowest in the US

Pennsylvania's 3.07% flat income tax rate has been stable for decades — a deliberate policy choice that gives the state a simple, predictable income tax system. Unlike most states, Pennsylvania does not conform to the federal definition of Adjusted Gross Income (AGI). PA calculates taxable income using its own rules: wages, salary, net profits from business, net gains from the sale of property, interest, dividends, and certain other income classes are each tracked separately under the PA system.

There is no standard deduction equivalent that reduces income across the board, and there is no general personal exemption for most filers. This means that at 3.07%, most of what you earn is taxed — there is little sheltering at the base. PA does, however, allow certain deductions within specific income classes (for example, business expenses against net profit income). The simplicity of the system — one rate, clear income definitions — means filing a Pennsylvania state return is generally less complex than many other states.

The 3.07% rate has remained unchanged since 2004, making Pennsylvania one of the most stable income tax environments in the country for long-term planning. For comparison: New York's top rate is 10.9%, New Jersey's is 10.75%, and Maryland's combined state-plus-county rate can approach 9.5%.

How Much Pennsylvania Income Tax Do You Actually Pay?

Because Pennsylvania has a true flat rate with no standard deduction and no personal exemption for most filers, the math is straightforward: multiply gross income by 3.07%. The effective rate equals the marginal rate at every income level for wage earners.

• $50,000 income: PA state tax $1,535 — effective rate 3.07%
• $75,000 income: PA state tax $2,303 — effective rate 3.07%
• $100,000 income: PA state tax $3,070 — effective rate 3.07%
• $150,000 income: PA state tax $4,605 — effective rate 3.07%
• $250,000 income: PA state tax $7,675 — effective rate 3.07%

The flat structure means high earners pay proportionally the same as lower earners at the state level — there is no bracket progression. This is a defining feature of Pennsylvania's tax policy and one reason the state attracts certain high-income professionals who are sensitive to marginal rates.

Note that local Earned Income Tax is assessed on top of the state rate. For most suburban Pennsylvania residents, local EIT is 1%, bringing the combined state-plus-local income tax to 4.07% — still very competitive nationally. Always check your specific municipality's EIT rate, as rates vary.

Philadelphia Wage Tax: The Hidden Cost for Philly Residents

Philadelphia imposes a Wage Tax on all compensation earned by residents — and it is the highest city-level income tax rate in the United States. The 2026 rate for Philadelphia residents is 3.75%. Combined with Pennsylvania's 3.07% state rate, Philadelphia residents face a total income tax burden of 6.82% on wages — before considering federal income taxes.

Worked examples for Philadelphia residents on wages:

• $100,000 income: State $3,070 + City $3,750 = $6,820 total (6.82% effective)
• $150,000 income: State $4,605 + City $5,625 = $10,230 total (6.82% effective)
• $200,000 income: State $6,140 + City $7,500 = $13,640 total (6.82% effective)

Philadelphia also levies a Net Profits Tax (NPT) on self-employment income and business profits earned by city residents, currently at a similar rate. This means Philadelphia-based sole proprietors and freelancers face city-level taxation on both their wage income and their self-employment income.

For comparison within Pennsylvania: Pittsburgh residents pay a 3% earned income tax (state 3.07% + city 3% = 6.07% combined). Most suburban PA communities levy 1% local EIT, making the combined burden 4.07%. The difference between living in Philadelphia versus suburban Philadelphia can represent thousands of dollars per year in local income taxes on a mid-level salary.

Non-residents who work in Philadelphia also pay a Philadelphia Wage Tax, currently at a slightly lower rate (approximately 3.44% for non-residents in 2026 — verify with the Philadelphia Department of Revenue). Commuters from New Jersey or suburban PA who work in the city are subject to this non-resident rate on their Philadelphia-sourced wages.

Pennsylvania's Retirement Income Exemption: A Major Advantage

Pennsylvania's treatment of retirement income is among the most favorable of any state in the US. The state exempts virtually all types of retirement income from state income tax, provided the taxpayer is age 59.5 or older (the federal penalty-free withdrawal age) or is retired, disabled, or has reached the plan's normal retirement age.

Income types exempt from Pennsylvania income tax in retirement:

• Social Security benefits: Fully exempt — PA does not tax Social Security at any income level
• 401(k) and 403(b) distributions: Exempt after age 59.5
• Traditional IRA distributions: Exempt after age 59.5
• Pension income: Exempt (public and private pensions, provided received after normal retirement age or age 59.5)
• Annuity payments: Generally exempt after the taxable component is established

The practical impact is significant. A Pennsylvania retiree with $80,000 in Social Security and $60,000 in 401(k) distributions would owe $0 in Pennsylvania state income tax on that income. Compare this to a state like Minnesota or Vermont, which tax Social Security at high rates, or California, which taxes all retirement distributions as ordinary income.

This retirement income exemption makes Pennsylvania an outlier: it has no general standard deduction, no personal exemption, and taxes most working income at 3.07% — but it almost entirely forgives the state income tax burden for retirees living off retirement savings. For this reason, Pennsylvania is consistently ranked among the top states for retirement income tax treatment, despite being perceived as a moderate-to-high overall tax state due to its local tax complexity.

Local Earned Income Tax Across Pennsylvania

Every municipality in Pennsylvania levies a Local Earned Income Tax (EIT) under the authority of the Local Tax Enabling Act. There is no opt-out — every Pennsylvania resident paying state income tax also owes local EIT to their municipality and school district. Rates are set locally and vary considerably:

• Philadelphia: 3.75% (residents) — the highest rate in the state and the highest major-city rate in the US
• Pittsburgh (City of Pittsburgh): 3% combined (city + school district)
• Most suburban counties (Chester, Delaware, Montgomery, Bucks): Typically 1%–1.5% combined (municipality + school district split)
• Lancaster, Reading, Allentown: Rates vary but typically 1%–2.5%; verify with the local tax collector
• Rural municipalities: Often 1% — the statutory minimum in many cases

EIT is collected by the municipality of residence, not by the employer's location. If a Chester County resident works in Philadelphia, they pay Philadelphia's non-resident wage tax on their Philadelphia-sourced wages, and they receive a credit on their Chester County EIT to avoid double taxation. The credit and reciprocal rules are complex for multi-municipality situations — consult a PA tax professional if you work across county or city lines.

Local EIT applies to earned income — wages, salaries, net profits from self-employment. It does not apply to interest, dividends, or capital gains in most municipalities. The Pennsylvania Department of Community and Economic Development maintains a statewide database of local EIT rates, and the Pennsylvania Local Tax Bureau (DCED) is the authoritative source for current municipal rates.

Pennsylvania vs Neighboring States: NY, NJ, MD, OH, DE, WV

Pennsylvania sits at the intersection of several high-tax northeastern states and lower-tax Appalachian states, making state income tax comparisons particularly relevant for residents near state borders.

• New York: Top rate 10.9% (on income over $25M; 6.85% starts at $17,150 for single filers). New York City adds up to 3.876% local tax. At $100,000, a NYC resident pays significantly more than a Philadelphian despite PA's high city wage tax. PA wins at virtually every income level for state-plus-local combined burden.
• New Jersey: Top rate 10.75% (on income over $1M; 6.37% from $75,000–$500,000). NJ allows a more generous standard deduction than PA does. At $100,000, NJ income tax is approximately $5,200 — higher than PA's $3,070 state-only rate but comparable to Philadelphia's $6,820 combined burden.
• Maryland: State rate 5.75% (top bracket) plus county income tax of up to 3.2% (Howard County, Montgomery County). Combined Maryland state-plus-county at $100,000 is approximately $8,000–$9,000 — substantially higher than suburban PA's 4.07%.
• Ohio: Graduated rates from 2.765% to 3.5% (on income over $115,300). Ohio cities also levy municipal income taxes — Columbus levies 2.5%. At $100,000, an Ohio suburban resident pays approximately $3,300–$5,800 depending on city of residence — comparable to PA.
• Delaware: Graduated rates from 0% to 6.6% (on income over $60,000). No local income tax in most areas. At $100,000, Delaware income tax is approximately $4,700 — higher than PA state-only but lower than Philadelphia combined.
• West Virginia: Graduated rates from 3% to 6.5% (top bracket). WV significantly cut its rates starting 2023. At $100,000, WV income tax is approximately $4,000–$5,000 — higher than PA state-only.

For most income levels, Pennsylvania's 3.07% state rate is lower than all neighboring states. Adding local EIT brings the effective burden to 4.07%–6.82% depending on where in PA you live — still competitive except for Philadelphia residents, who face a combined burden comparable to New Jersey or Maryland.