State-by-State Guide to Taxes on Retirees
Tool | December 2020

Pennsylvania State Tax Guide for Retirees

State tax rates and rules for income, sales, property, estate, and other taxes that impact retirees.

Pennsylvania

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The Bottom Line
Flag of Pennsylvania

Not Tax Friendly

Like neighboring New Jersey, Pennsylvania takes it very easy on Social Security benefits and other types of retirement income. Plus, the local income taxes generally don't affect retirees either, as they're levied on wages.

Also like New Jersey, property taxes in the Keystone State are on the high end (although they're not as bad in Pennsylvania as they are in New Jersey). The state's median property tax rate is the 12th-highest in the U.S. Although a property tax/rent rebate program is available, it comes with income limits.

Sales taxes are below average in Pennsylvania. That's certainly some good news for retirees. However, the state also has an inheritance tax that can gum up your estate planning.

Income Tax Range

Pennsylvania has a flat rate of 3.07%. Municipalities and school districts can also impose taxes on wages or income.

Taxation of Social Security Benefits

Social Security benefits are not taxed by the state.

Tax Breaks for Other Retirement Income

Income from private employer, government, and military retirement plans paid after the taxpayer becomes eligible to retire is exempt.

Railroad Retirement benefits are also exempt.

Sales Tax

6% state levy. Philadelphia has a local sales tax of an additional 2%, and Allegheny County (Pittsburgh's home county) adds a local sales tax of 1%. The combined average state and local rate is 6.34%, according to the Tax Foundation.

Groceries: Exempt
Clothing: Exempt
Motor Vehicles: Taxable
Prescription Drugs: Exempt

Real Property Taxes

In Pennsylvania, the median property tax rate is $1,499 per $100,000 of assessed home value.

Homeowners and renters 65 or older and widow(er)s 50 or older may be eligible for property tax or rent rebates through the Property Tax/Rent Rebate Program. A maximum standard rebate of $650 is generally available, but supplemental rebates can boost the amount to $975 for homeowners with particularly high tax burdens. To qualify, annual household income must not exceed $35,000 ($15,000 for renters), although 50% of Social Security and Railroad Retirement benefit payments are excluded from eligibility income.

Starting in 2020, public school districts can offer property tax credits to seniors who volunteer in local schools. Credits are only allowed for people 60 years of age or older who (1) have been a Pennsylvania resident for at least 90 days, (2) own real property in the school district, and (3) participate in the school district's volunteer program.

Annual Car Taxes and Fees

No annual vehicle tax or fee is imposed.

Estate and Inheritance Taxes

Pennsylvania has an inheritance tax, but it doesn't apply to property inherited by the decedent's spouse, parents (if the decedent is age 21 or younger), or child age 21 or younger. The tax is imposed at a 4.5% rate for the decedent's parents (except if the decedent is 21 years old or younger), grandparents, lineal descendants, son-in-law, or daughter-in-law. The rate is 12% for people who inherit property from a sibling and 15% for all other heirs. A 5% discount is allowed if the tax is paid within three months of the decedent's death.

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