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Pennsylvania Taxes: What You Need to Know (2026 Update)
Pennsylvania has a flat individual income tax rate of 3.07%, with additional local income taxes applicable. The corporate net income tax rate is 7.49% for 2026, reduced from 7.99% in 2025 as part of a legislated phasedown to 4.99% by 2031. The state sales tax rate is 6.00%, with an average combined state and local rate of 6.34%. The effective property tax rate on owner-occupied housing is 1.19%.
Pennsylvania’s tax system ranks 36th overall on the 2026 State Tax Competitiveness Index.
Key taxes
- Inheritance tax
- Gas tax: 58.7 cents per gallon
- Cigarette excise tax: $2.60 per pack
Taxable Income Classes
- Compensation
- Interest
- Dividends
- Net profits from business, profession, or farming
- Gains from property dispositions
- Income from rents, royalties, patents, and copyrights
- Income from estates or trusts
- Gambling and lottery winnings (cash prizes only)
Losses in one income class cannot offset gains in another, and carryforwards or carrybacks are not allowed.
Exclusions
- Qualified payments to IRC Section 125 plans for healthcare
- Capital gains from the sale of a principal residence for eligible taxpayers
- Personal use of employer-owned property
- Retirement income: Social Security, pensions, 401(k)/IRA distributions, and military retirement pensions are fully exempt from Pennsylvania income tax
On average, Pennsylvania collects $6,644 in state and local taxes per capita and has a per capita state and local debt of $8,838. Public pension plans are 70% funded.
Source: Tax Foundation — Pennsylvania Tax Rates & Rankings (2026) | PA Dept. of Revenue — Personal Income Tax
Here are the key tax withholdings in Pennsylvania:
Federal, State, and Local Tax Withholding
- Federal Income Tax: The federal income tax has seven tax rates in 2026: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The One Big Beautiful Bill Act (OBBBA), passed in July 2025, permanently extended this rate structure.
- State Income Tax (Pennsylvania): Pennsylvania uses a flat tax rate of 3.07% on all taxable income. Pennsylvania does not use allowances or exemptions in its withholding calculation, the tax is simply a flat percentage of wages.
- Local Income Tax: Local taxes vary by municipality. Philadelphia’s 2025 Wage Tax rate is 3.74% for residents and 3.43% for non-residents. The highest local rate in the state is 3.75% in Chester City. Use the Pennsylvania DCED database to confirm your municipality’s Political Subdivision (PSD) rate.
Source: PA Dept. of Revenue | City of Philadelphia — Wage Tax
FICA & State Insurance Taxes
- Social Security Tax: The wage base limit is the maximum wage that’s subject to the tax for that year. For earnings in 2026, this base limit is $184,500. The employee and employer rate is each 6.2%, for a combined 12.4%. Maximum employee tax: $11,439.
- Medicare Tax: The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2025. There is no wage base limit for Medicare tax. Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes.
- Pennsylvania Unemployment Compensation (UC) — Employee: The employee contribution rate has been set at 0.07 percent for the calendar year 2026. There is no cap on gross wages for employee withholding.
- Pennsylvania UC Employer: The taxable wage base is $10,000 per employee per calendar year. There is a 9.2 percent Surcharge in effect. There is a 0.60 percent Additional Contributions tax in effect. The minimum experience-based contribution rate is .014190 and the maximum experience-based contribution rate is .103734 (both include the 9.2 percent Surcharge and the 0.60 percent Additional Contributions tax).
Source: IRS — Topic 751 | IRS Publication 15 (2026) | SSA.gov — 2026 Wage Base | PA Dept. of Labor & Industry — 2026 Tax Highlights
Pre-Tax Deductions
- Medical Insurance: Premiums under a qualifying employer-sponsored plan are typically deducted pre-tax and excluded from both federal and Pennsylvania taxable income under IRC Section 125.
- 401(k) Contributions: The amount individuals can contribute to their 401(k) plans in 2026 has increased to $24,500, up from $23,500 for 2025. Catch-up contributions for age 50+ are $8,000; for age 60–63, $11,250.
- Health Savings Account (HSA): The annual amount that individuals can contribute to health savings accounts will increase from $4,300 to $4,400 in the case of individual coverage, and from $8,550 to $8,750 in the case of family coverage. A $1,000 additional catch-up applies for those age 55+.
- IRA Contributions: The limit on annual contributions to an IRA is increased to $7,500 from $7,000. Catch-up for age 50+ is $1,100, bringing the total to $8,600.
- Dependent Care FSA: The One Big Beautiful Bill increased the annual contribution limit to a dependent care flexible spending account from $5,000 to $7,500 ($3,750 for married filing separately).
Source: IRS — Notice 2025-67 | IRS Rev. Proc. 2025-32
Summary Table: Key 2026 Pennsylvania Payroll Tax Rates & Limits
| Category | Tax Rate / Limit |
|---|---|
| Federal Income Tax | 10%–37% (varies by income and filing status) |
| State Income Tax (PA) | 3.07% flat |
| Local Income Tax | Varies (e.g., Philadelphia: 3.74% residents / 3.43% non-residents) |
| Social Security Tax | 6.2% (up to $184,500 wage base) |
| Medicare Tax | 1.45% (additional 0.9% on wages over $200,000) |
| PA UC — Employee Withholding | 0.07% (no wage cap) |
| PA UC — Employer Contribution | 1.42%–10.37% (experience-based; $10,000 wage base) |
| 401(k) Contributions | Up to $24,500 |
| IRA Contributions | Up to $7,500 |
| Health Savings Account (HSA) | Up to $4,400 (individual) / $8,750 (family) |
| Dependent Care FSA | Up to $7,500 |
| Federal Standard Deduction | $16,100 (single) / $32,200 (married filing jointly) |
Median Household Income in Pennsylvania
Pennsylvania’s median household income continues to grow. In 2023, the median household income was approximately $79,820, according to Statista — up from $72,210 the prior year. For context, a household at the median income level in Pennsylvania has a combined effective tax rate (federal + state + local) well below the top marginal rates, given Pennsylvania’s flat 3.07% state tax and progressive federal structure.
Pennsylvania Tax Brackets 2026
For the tax year 2026, Pennsylvania continues to apply a 3.07% flat personal income tax rate across all taxable income categories, ensuring consistency for residents, part-year residents, and nonresidents. There are no brackets, every dollar of taxable income is taxed at the same rate, regardless of filing status or income level.
Pennsylvania State Income Tax Rate — 2026
| Filing Status | Tax Rate |
|---|---|
| Single | 3.07% |
| Married Filing Jointly | 3.07% |
| Married Filing Separately | 3.07% |
| Head of Household | 3.07% |
| Qualifying Widow(er) | 3.07% |
Source: PA Dept. of Revenue — Personal Income Tax
For federal taxes, the brackets vary based on income and filing status. For tax year 2026, the standard deduction increases to $32,200 for married couples filing jointly. For single taxpayers and married individuals filing separately, the standard deduction rises to $16,100 for tax year 2026, and for heads of households, the standard deduction will be $24,150.
Federal Income Tax Brackets 2026
| Income Range (USD) | Single Filers | Married Filing Jointly | Head of Household |
|---|---|---|---|
| Up to $11,925 | 10% | 10% | 10% |
| $11,926 – $48,475 | 12% | 12% | 12% |
| $48,476 – $103,350 | 22% | 22% | 22% |
| $103,351 – $197,300 | 24% | 24% | 24% |
| $197,301 – $250,525 | 32% | 32% | 32% |
| $250,526 – $640,600 | 35% | 35% | 35% |
| Over $640,600 | 37% | 37% | 37% |
Source: IRS — Revenue Procedure 2025-32 via IRS.gov | Tax Foundation — 2026 Federal Tax Brackets
Disclaimer: This content is for informational purposes only and does not constitute tax or legal advice. Always verify current rates with the PA Department of Revenue (pa.gov/agencies/revenue), the IRS (irs.gov), and your local municipality before processing payroll.
