Tax Burden: Pennsylvania has much higher than average tax burden - at 10.2% it is the 15th highest in the nation. Marginal Income Tax Rates. Pennsylvania provides a tax-friendly climate for retirees. State-by-State Guide to Taxes on Retirees Click on any state in the map below for a detailed summary of taxes on retirement income, property and purchases, as well as special tax breaks for seniors. Pennsylvania has a single tax bracket of 3.07%. Income earned by retirees is subject to Pennsylvania state tax, which features a flat rate of 3.07 percent as of 2018. 2020 Best Places to Retire in Pennsylvania About this List Explore the best places to retire in the U.S. based on number of retirees, weather, and access to healthcare and entertainment. Pennsylvania state Rep. Frank Ryan, R-Lebanon County, plans a bill to replace school property taxes with these revenue streams: A 4.92% tax on … Pennsylvania income tax laws make most retirement and pension income exempt from state tax. If you choose to retire to a state that has an income tax, we think Pennsylvania is about as good as it gets. When it comes to taxation of retirees, however, its reputation as a high tax state is not deserved. It is one of only two states, and the only state on the East Coast, that considers pension income completely tax exempt. Pennsylvania residents are not required to pay state personal income tax on retirement income from a qualified pension plan. While there are plenty of reasons to spend your golden years in the Keystone State, such as easy access to major cities like Philadelphia and New York City, not to mention surrounding yourself with important historical significance, one huge advantage is Pennsylvania’s retirement tax-friendliness. Some municipalities have their own additional income tax ranging from 1% to a high of 3.928% in Philadelphia. Why do so many retirees love Pennsylvania? This is because pensions, IRA distributions, and social security are all exempt from the state’s 3.07% income tax. While property tax rates are fairly high here, the average total sales tax rate is just 6.34%, the 16th lowest mark in the U.S. It also exempts pension income for seniors 60 and older. Every resident, part-year resident or nonresident individual must file a Pennsylvania Income Tax Return (PA-40) when he or she realizes income generating $1 or more in tax, even if no tax is due (e.g., when an employee receives compensation where tax is withheld).Refer to the below section on TAXATION, for additional information. Assistance with Determining Your Federal Withholding To change the amount of the federal withholding tax you have withheld from your PSERS benefit payment, PSERS offers a Federal Tax Withholding Calculator on the Member Self-Service (MSS) Portal to assist you. Pennsylvania does not tax its residents’ retirement income. Retirement taxes in Pennsylvania are also low. The state fully exempts all income from Social Security and retirement accounts. When it comes to taxable income such as wages and investment income, Pennsylvania has one of the lowest income tax rates – a flat rate 3.07%.

“In New Jersey, a single person with over $35,000 in taxable income would be at the 3.5% tax rate,” he said. Pennsylvania Retirement Income Taxes: Generally, you should not include the amount of income you received from a commonly recognized retirement plan that was sponsored by your employer's Pennsylvania qualifying retirement or old age benefit program or disability retirement program. Pennsylvania does not follow federal law concerning certain retirement plans, and specific Pennsylvania rules determine what portion is taxable for Pennsylvania. In Pennsylvania, as of publication in October 2012, seniors who planned to work during retirement should expect to be taxed on those earnings at the state income tax rate of 3.07 percent. A qualified pension program includes written provisions, establishes eligibility requirements, provides for payments at regular intervals following retirement and does not permit benefits to be distributed until employment is terminated, according to the … But Pennsylvania is one of the few states that don’t tax retirement income—including income from 401 (k)s, IRAs or Social Security—after you turn 59½. Ranking based on data from the U.S. Census, FBI, CDC, and other data sources. Pennsylvania does not tax commonly recognized pension, old age, or retirement benefits paid after becoming eligible to retire and retiring. Several Pennsylvania cities rank among the best places to retire because of a relatively low cost of living as well as many top cultural institutions and health care facilities. Brief Overview and Filing Requirements Who Must File. Retirement Income: Retirees can save a lot on taxes in Pennsylvania. PA Retirement Taxes. The Keystone State also has the lowest flat tax rate in the country at just 3.07 percent. While interest and capital gains are still taxable, let’s all be thankful for what we have. This is a big advantage for a retiree!

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