The Keystone State is tax-friendly for retirees, with no state tax on Social Security, pensions or income from retirement plans, and relatively low income and sales tax rates. But it’s one of just six states that tax inheritances, and the average property tax rate is high compared with other states.
Pennsylvania has a flat individual income tax rate of 3.07 percent, meaning that every resident pays the same rate regardless of their income level. Some municipalities levy local income taxes, which include any school district taxes. Philadelphia, for example, levies one of the highest local income tax rates in the state, at 3.75 percent. Municipalities usually levy a lower rate for nonresidents who work there.
Watch the video below to learn how to identify your 2023 federal income tax brackets.
Retirees get a reprieve from income tax because pensions, 401(k) and 403(b) plans and IRAs are exempt from tax.
AARP's Retirement Calculator can help you determine if you are saving enough to retire when — and how — you want.
Capital gains from investments and dividends are taxed at a flat rate of 3.07 percent. Local taxes are not levied on investment income.
No, but you may pay federal taxes on a portion of your Social Security benefits , depending on your income. Up to 50 percent of your benefits will be taxed if you file an individual tax return and make $25,000 to $34,000 in total income — or if you file jointly and as a household make $32,000 to $44,000 in total income. Up to 85 percent of your benefits will be taxed by the federal government if your total income is more than $34,000 individually or $44,000 as a couple.
AARP's Social Security Calculator can assist you in determining when to claim and how to maximize your Social Security benefits.
Property tax in Pennsylvania is a local tax based on the assessed value of your home. Assessments and reassessments are conducted at the county level. The amount of tax owed is based on a millage rate, which is determined by your county or municipality. One mill equals $1 per every $1,000 of a property’s assessed value. The millage rate is then multiplied by the assessed value of your home.
Real estate taxes vary widely in Pennsylvania, but the average tax rate in 2021 was 1.49 percent, according to the Tax Foundation . March 31 is typically the deadline to pay property taxes in Pennsylvania.
Pennsylvania offers a property tax reduction through a homestead or farmstead exclusion. Generally, most owner-occupied homes and farms are eligible, so long as the home is a primary residence. Contact your county assessment office for more information.
Visit your county’s website to learn about property taxes in your area, or for information about how to contest the value of your property.
Toiletries are generally taxed, but not toothbrushes, toothpaste or dental floss. Most clothing is exempt, but certain items are taxed, such as formal wear, furs, Halloween costumes and swimsuits.
Pennsylvania is one of just six states that tax inheritances. A surviving spouse is exempt, as is a parent inheriting from a child 21 or younger. Everyone else will pay an inheritance tax ranging from 4.5 to 15 percent of your estate’s value, depending on their relationship to you.
Some property is exempt from the inheritance tax, including property owned jointly between spouses, as well as certain farmland and other agricultural property if the property is transferred to eligible relatives . Property from a military member who has died from an injury or illness received while on active duty is also exempt. For more information about Pennsylvania’s inheritance tax and exemptions, visit the state Department of Revenue’s website .
The Property Tax/Rent Rebate Program provides rebates to residents 65 and older, widows and widowers 50 and older, and adults with disabilities. Applications for the 2023 rebate are due by June 30, 2024.
Beginning in 2024, the maximum standard rebate increased to $1,000, up from $650. Additionally, the income limit rose to $45,000 for homeowners and renters. Income limits in future years will be tied to the cost of living, so people will not be priced out of the program if their Social Security payments increase.
The amount of the rebate is based on your income:
Residents in Philadelphia, Pittsburgh and Scranton may qualify for additional rebates ranging from $190 to $500, based on income. These are calculated automatically if your income is $30,000 or less and you pay more than 15 percent of your total income in property taxes.Also, explore if your town or county offers tax relief for seniors. Philadelphia, for example, offers a senior freeze program for older adults who meet income requirements. Find more information about eligibility requirements, deadlines and how to apply on the city’s website .
Allegheny County, which includes Pittsburgh, offers a flat 30 percent property tax discount (up to $650 annually) on your primary residence if you’ve owned and lived in it continuously for the past 10 years. To qualify, you must be 60 or older (50 if you are widowed) or have a permanent disability if you’re age 18 to 60, and meet income requirements. The Allegheny County Treasurer has more information.
Pensions, including for the military, are not taxed. Military active-duty pay is also exempt from tax.
A Pennsylvania state tax return is due April 15, 2024, which is also the deadline for federal returns .
Pennsylvania will grant a six-month extension (until Oct. 15, 2024) if you fill out an application ; however, you must pay any taxes owed by April 15. The Pennsylvania Department of Revenue has more information .
For help estimating your annual income taxes, use AARP's Tax Calculator.
Sharon Waters, a former CPA, has written for Wired.com and other publications.
