​​​​​​​Brief Overview and Filing Requirements

Who Must File

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.

Note: A taxpayer is required to file a return, even if he or she ultimately qualifies for special tax forgiveness (SP). A filed, signed tax return is necessary so that the department can verify whether a claimant meets SP eligibility standards. Refer to PA-40 Schedule SP and PA Personal Income Tax Guide - Tax Forgiveness, for additional information.

In addition, the filing of a return benefits the Commonwealth in other ways. The information from a return is statutorily permitted to be used to determine school funding for Commonwealth school districts as well as to provide information to local tax collection districts for local tax collection compliance, to the Pennsylvania Higher Education Assistance Agency for grant application verification, and to Pharmaceutical Assistance Contract for the Elderly (PACE) for income verification. Failure to provide a return prevents specific information to be available for accurate school funding, local tax collection enforcement and income verification.

Residency Status

An individual is considered a Pennsylvania resident for personal income tax purposes if he or she either is domiciled in Pennsylvania, or is a statutory resident. Pennsylvania residents are subject to Pennsylvania personal income tax (PA PIT) on all Pennsylvania taxable income classes, both Pennsylvania and non-Pennsylvania source income, though they may qualify for a resident credit for tax paid to other states on income earned outside of Pennsylvania.

Individuals who do not have either their domicile or statutory residence in Pennsylvania are considered nonresidents for personal income tax purposes. Nonresidents are taxed only on the income they receive from sources within Pennsylvania, and will not qualify for a tax credit associated with taxes paid to other states.

Pennsylvania Resident

A Pennsylvania resident is either domiciled in Pennsylvania or domiciled in another state or country but qualifies as a statutory resident.

• Domicile
  “Domicile” is the place where an individual, by present and voluntary intention, establishes his true, fixed and permanent home or home for the indefinite future. Domicile is the place where an individual intends to return whenever absent. Domicile is a matter of intent and fact. Domicile once established continues until a person abandons his existing domicile and establishes a new domicile. A person asserting a change of domicile has the burden to prove the change.
   
  A person may have more than one residence but may have only one place of domicile at a time.
   
  Some factors to consider in determining an individual’s place of domicile are:
  • Where does the taxpayer spend the greatest amount of time during the taxable year;
  • Where does the taxpayer support his or her spouse and children;
  • Where does the taxpayer purchase the necessities of life;
  • Where does the taxpayer have doctors, lawyers, and accountants;
  • Where does the taxpayer house his or her pets;
  • Where does the taxpayer have active banking accounts;
  • Where does the taxpayer worship regularly;
  • Where does the taxpayer participate in social, fraternal, or athletic organizations, lodges, or country clubs;
  • Where does the taxpayer have works of art, expensive furniture, family portraits, or heirlooms;
  • Where does the taxpayer fulfill local tax obligations;
  • Where is the taxpayer employed;
  • Where does the taxpayer own real estate fit for year-round living;
  • Where does the taxpayer maintain a driver's license and vehicle registration;
  • Where does the taxpayer maintain professional licenses;
  • Where does the taxpayer maintain union membership;
  • Where does the taxpayer declare residency for fishing or hunting licenses, income tax returns, or school tuition;
  • Where does the taxpayer conduct his business;
  • Where does the taxpayer receive mail;
  • Where does the taxpayer receive unemployment income;
  • Where does the taxpayer record his or her address for insurance policies, deeds, mortgages, leases, passport, federal and local tax returns, etc;
  • Where was the taxpayer domiciled at birth;
  • Where does the taxpayer maintain safe deposit boxes;
  • Where does the taxpayer own a cemetery plot;
  • Where has the taxpayer applied for and received a homestead exemption;
  • Where is the taxpayer listed in the telephone directory;
  • Where has the taxpayer obtained a homestead exemption (Note: The homestead exemption may not be claimed by nonresidents for any residence maintained in Pennsylvania.);
  • Where does the taxpayer gather for family and social events;
  • Where does the taxpayer maintain TV or Internet connections; and/or
  • Where is the taxpayer registered to vote?

• Conditions Required to Establish a New Domicile
  You can have only one domicile at any given time. Your domicile does not change until you move to another state or country with the sincere intention of making your “new” permanent home there and abandoning your previous domicile.
   
  If an individual moved to another state or country, but intended to stay there only for a fixed or limited time (no matter how long), the domicile does not change. Once established in a locality or state, your domicile continues there until you establish a new domicile. It is not dependent upon continuous physical presence. It is not abandoned by absence or even by presence in a former domicile, no matter how long continued, if, in leaving and during the absence, there is no firm, sincere, unconditional intention of remaining in the other jurisdiction for an indefinite and uncertain period.
   
  For example, temporary absence from a new domicile with presence in a former domicile for the purpose of transacting business or for the sake of health, pleasure, or education, with a definite intention of returning to the new domicile does not affect a person's domiciliary status. If a person left their domicile to seek new employment intending to remain in the other location only if they find employment, they did not change their domicile.
   
  To establish a new domicile, the following three conditions must be met:
  • There must be evidence of a firm and definite present intention to discontinue making the former domicile your primary base of operations;
  • There must be evidence of a firm and definite present intention to make the new domicile your primary base of operations; and
  • There must be evidence of actual physical presence and actual abode (transient, temporary, or permanent) in the new location.

If all three requirements are met, the date of the change is the first day of actual physical presence in the new location.

For example, a retired couple with a permanent summer home inside Pennsylvania and a permanent winter home outside of Pennsylvania can only have one state of domicile at any given time. Their determination as to the state of domicile should be made based on the factors provided in the definition of domicile. The location of your domicile is where you have the greatest connection.

After you determine the location with the greatest connection, you should determine if you have taken the necessary steps to establish a new domicile outside of Pennsylvania. Have you moved your church membership, vehicle registration and driver’s license, voter registration, bank accounts, etc.? No one item determines your domicile. Instead, it is the weight of all facts that determines in which state you are domiciled.

• Statutory Residency
  A person who has a domicile outside the Commonwealth can still be considered a resident of Pennsylvania for personal income tax purposes. Such a person is called a “statutory resident.” Statutory residency is established if a person domiciled outside the Commonwealth:
  • Has a permanent place of abode in Pennsylvania; and
  • Spends more than 183 days (midnight to midnight) of the taxable year in Pennsylvania.

A permanent place of abode is a house, apartment, dwelling place, or other residence that can be maintained as a household for an indefinite period, whether it is owned by the occupants or not. An abode is not permanent if it is occupied only during a fixed or limited period of time for a particular purpose. Barracks, bachelor officer’s quarters, quarters on ships, and other living accommodations provided by an employer for a definite period do not qualify as a permanent place of abode. College dormitories, fraternity houses, sorority houses, and off-campus rentals by students enrolled in college or universities do not qualify as a permanent place of abode.

Pennsylvania Nonresident

An individual is a nonresident for PA PIT purposes if he or she is a domiciliary of another state or country unless he qualifies a statutory resident as explained above.

A Pennsylvania domiciliary can also be considered a non-resident for a taxable year if he or she meets the criteria of a “statutory non-resident,” as follows:  the person does not maintain a permanent place of abode (defined above) in Pennsylvania at any time during the tax year; maintains a permanent place of abode elsewhere; and spends no more than thirty days of the tax year in Pennsylvania.

Persons in the Military or Foreign Service

Unless there is an intention to change his or her domicile, a person generally does not acquire a new domicile by entering the armed forces, or lose the domicile that the person had upon entering. A person on military duty is not precluded, however, from acquiring a new domicile where his or her family is stationed. A person in the military and Foreign Service, or a person living in a foreign country for other than a temporary or transitory purpose while a lawful permanent resident or citizen of the country, is treated as a domiciliary of that country if the person:

• Is not an employee of the U.S. government, its agencies or instrumentalities (including members of the armed forces and career appointees in the U.S. Foreign Service); and
• Does not hold an appointive office in the executive branch of the U.S. government.

However, special rules may apply if the employee or officer maintains a permanent place of abode at that location. An individual who has a domicile in Pennsylvania is considered a nonresident if meeting all three of the requirements listed under Pennsylvania Resident above.

College Student

Generally, a child has the same domicile as his or her parents or legal custodian. Becoming a legal adult does not by itself separate a child from the parents’ or legal custodian's domicile. The child merely acquires the power to establish a separate or new domicile.

Minor Child

The domicile of a minor child is the same as the domicile of the child's parents. If the parents are separated, then the child's domicile is the domicile of the parent with whom the child resides or the domicile of the child's legal custodian.

Dual Residency (NESTOA Agreement)

Pennsylvania entered into the Northeastern States Tax Officials Association Cooperative Agreement (NESTOA Agreement) along with Connecticut, Delaware, the District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. This agreement addresses the taxation of dual residents (that is, taxpayers who are residents of more than one state due to domicile in one state and statutory residency in another).

The NESTOA Agreement provides that in a dual residency situation, the state to which earned income is sourced gets to tax the income. For non-sourced income, such as income from intangible assets, the state of domicile gets to tax the income.

For purposes of applying the resident credit in dual residency situations, the state of domicile must give a resident credit for earned income sourced to the state of statutory residence. For non-sourced income, the state of statutory residence must give the resident credit.

If earned income is sourced to a state other than the state of domicile and state of statutory residence, then the state of domicile gets to tax the income, not the state of statutory residence. If the state to which the income is sourced imposes an income tax, then the state of domicile would give the resident credit.

Note: The reciprocal agreements are not applicable in cases of a dual resident of the reciprocal agreement states. In such cases, the NESTOA Agreement applies.

Example:
Dan is a domiciliary resident of Pennsylvania for the entire taxable year. He leases an apartment in Maryland and works 230 days in Maryland. Maryland considers Dan to be a Maryland statutory resident for income tax purposes. He earns $50,000 in compensation while working in Maryland. Dan also receives $5,000 of interest income. Because Dan is a domiciliary resident of Pennsylvania, Dan must report his compensation and interest income as Pennsylvania-taxable income. Dan may claim the Pennsylvania resident credit on PA-40 Schedule G-L, Credit for taxes Paid by PA Resident Individuals, Estates or Trusts to Other States, for the Maryland tax he paid on his compensation. However, he may not claim a resident credit on his Pennsylvania return on the interest income. He must claim a resident credit for tax paid to Pennsylvania on his Maryland return on the interest income. Refer to PA Personal Income Tax Guide - Deductions and Credits, for additional information.

Who is a Part-Year Resident

A part-year resident is a person who is a resident for part of the tax year and a non-resident for another part of the year. This usually occurs when someone changes their domicile during the taxable year.

Classes of Income

Overview

PA PIT is levied against the taxable income of resident and nonresident individuals, estates, and trusts. Pennsylvania taxes eight classes of income. Some items of federal income may not be taxable for PA PIT purposes if they cannot be determined to be taxable as one of Pennsylvania’s eight classes of income.

A loss in one class of income may not be offset against income in another class, nor may gains or losses be carried backward or forward from year-to-year. A loss by the taxpayer in the filing of a joint return may not offset the income of the spouse on the same joint return and vice versa.

PA PIT does not provide for a standard deduction or personal exemption. However, individuals are able to reduce their tax liabilities through allowable deductions, credits, and exclusions.

Eight Classes of Income

Pennsylvania Taxes the following eight classes of income:

• Compensation
• Interest
• Dividends
• Net profits from the operation of a business, profession or farm
• Net gains or income from the dispositions of property
• Net gains or income from rents, royalties, patents and copyrights
• Income derived through estates or trusts
• Gambling and lottery winnings

Tax Rate

Refer to the specific tax year’s tax return for the tax rate in effect.

Taxation

How Residents are Taxed

A resident is taxed on all of his or her taxable income whether it is received from sources inside or outside Pennsylvania.

A resident taxpayer is allowed a resident credit for income taxes imposed by and paid to other states based upon income that is subject to PA PIT. Such taxpayers should complete PA-40 Schedule G-L, Credit for Taxes Paid by PA Resident Individuals, Estates or Trusts to other States. PA-40 Schedule G-L must include a copy of the tax return filed with the other state.

Note: For tax years beginning on or after Jan. 1, 2014, a “state” does not include a foreign country. Refer to PA Personal Income Tax Guide - Deductions and Credits, for additional information.

How Nonresidents are Taxed

Nonresidents are subject to tax only on income from the eight enumerated classes of income earned, received or acquired from Pennsylvania sources.

Nonresidents are not subject to Pennsylvania tax on ordinary interest and dividends from investments, or gains realized on the sale, exchange, or disposition of intangible property derived from sources within Pennsylvania. Losses on the sale of intangible property may not be used to offset any taxable gains. Refer to PA Personal Income Tax Guide - Interest; Dividends; Gains (Losses) From the Sale, Exchange or Disposition of Property; or Personal Income Tax Bulletin 2005-02, Gain or Loss Derived From the Disposition Of A Going Concern [PDF], for additional information.

Nonresidents are subject to tax on interest and dividends from investments and gains realized on the sale, exchange, or disposition of intangible property derived from sources within Pennsylvania when employed in the operation of a business, profession, or farm. Refer to PA Personal Income Tax Guide - Net Income (Loss) From the Operation of a Business, Profession or Farm.

How Part-Year Residents are Taxed

A part-year resident is subject to the PA PIT as a resident for the portion of the year the individual was a resident of Pennsylvania. The same taxpayer is subject to the PA PIT as a nonresident for the remaining portion of the year.

For the portion of the year the person did not reside in Pennsylvania, a part-year resident is not subject to Pennsylvania tax on ordinary interest, dividends, gains from intangible property and any other intangible income.

Deductions, Exemptions Not Allowed in Computing Pennsylvania Income Tax

Refer to PA Personal Income Tax Guide - Deductions and Credits for information regarding deductions.

Expenses Allowed Under Pennsylvania Personal Income Tax

• Unreimbursed Business Expenses
  Refer to PA Personal Income Tax Guide - Gross Compensation for additional information.
• Net Income or Loss from the Operation of a Business, Profession, or Farm
  Refer to PA Personal Income Tax - Net Income (Loss) from the Operation of a Business, Profession, or Farm for additional information.
• Net Income or Loss from Rents, Royalties, Patents, and Copyrights
  Refer to PA Personal Income Tax Guide - Net Income (Loss) from Rents, Royalties, Copyrights, and Patents Chapter 7 for additional information.
• Net Gain or Loss from the Sale, Exchange or Disposition of Property
  Refer to PA Personal ​Income Tax Guide - Net Gains (Losses) from the Sale, Exchange or Disposition of Property for additional information.

When to File

Deadline to File Return

A taxpayer must report all taxable income received or accrued during the calendar year (from Jan. 1 through Dec. 31) tax period. The Pennsylvania Department of Revenue follows the Internal Revenue Service (IRS) due date for filing returns. You must file before midnight, April 15 or the next business day if April 15 falls on a Saturday, Sunday or IRS recognized holiday. The U. S. Postal Service postmark date on your envelope is proof of timely filing for paper returns. A late filing can result in the imposition of penalty and interest.

Extension of Time to File the PA-40 Individual Income Tax Return

The department will grant a reasonable extension of time for filing a PA-40, Individual Income Tax return. Unless a taxpayer is outside the U.S., the department will not grant an extension for more than six months. People who are outside the country and qualify for the IRS's automatic two-month extension to file their 1040 return will also be granted a two-month extension to file their PA-40.

Effective for taxable years beginning after Dec. 31, 2001, Act 46 of 2003, amends Pennsylvania’s Tax Reform Code of 1971 Section 330(b) 1 to conform with Section 7508 of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 7508), as amended. Members of the U.S. Armed Forces serving in qualified Hazardous Duty Areas that are deemed Combat Zones will have the same additional time to file and pay PA PIT and take other actions concerning the tax that they have for federal purposes. This section now mirrors federal law. The deadline is automatically extended for 180 days from the last day of combat or hazardous duty service or the last day of any continuous hospitalization for injury incurred in one of the zones or areas.

• An extension of time for filing will not extend the time for the payment of tax
  Any tax, which could reasonably be expected to be due, must be paid with REV–276, Application for Extension of Time to File, before the original return due date. No underpayment of tax penalty will be charged if at least 90 percent of the total tax liability was paid by the original due date and all additional tax is paid with the extension on or before the extended due date. However, interest will be imposed on the amount that was not paid by the original due date of the return.

Amended Returns

• Amended Return to Request a Refund
  A taxpayer may file an amended return to request a refund if a taxpayer over-reported income or did not claim allowable credits or deductions.
• Important Note
  Filing an amended return does not stop the statute of limitations for filing tax refund petitions. If an amended return seeking a refund is denied or not acted upon by the department, a petition for a refund will only be considered by the Board of Appeals so long as it is filed within three years of the payment due date.
   
  To pursue a personal income tax refund near the end of the three-year period from the payment due date or in a more complex scenario – any involving complicated factual, legal or policy issues that may require further documentation – taxpayers are encouraged to timely file a petition for refund with the Board of Appeals instead of an amended return. A petition for refund must be filed within three years of the date the tax was paid, (generally the original due date of the return, unless tax was paid with a late filing or paid with the extended filing of the return) to be considered.
   
  See Pennsylvania Department of Revenue e-Services – Board of Appeals Online Petition Center for additional information or to file a petition electronically at revenue.pa.gov/taxappeals. Refer to Miscellaneous Tax Bulletin 2008-01 Practice [PDF] before the Board of Appeals (Board) pursuant to Article 27 of the Tax Reform Code (Act 119 of 2006).
• When a Taxpayer May Not File an Amended Return
  A taxpayer MAY NOT file an amended return after the department issued an assessment if the amendment relates to the same taxable year and the same item of income or gain, deduction or loss involved in the assessment. In this case, you must either -
  • File a timely petition for reassessment with the Board of Appeals within 90 days of the mailing date of the assessment, or
    
  • Pay the assessment and file a petition for refund with the Board of Appeals within six months of the payment date of the notice of assessment, billing notice, or other departmental document.

Additionally, a taxpayer MAY NOT file an amended return challenging the department’s policy, its interpretation or the constitutionality of the Commonwealth’s statutes. A challenge of the department’s policy, its interpretation of the statutes or the constitutionality of the Commonwealth’s statutes must be made by filing a petition for reassessment or a petition for refund. Act 123 of 2024 changed the time period in which a taxpayer may file a Petition for Reassessment for any tax imposed under Article III from 60 days to 90 days.

• Amended Return to Report Underreported Income
  If after a return is filed a taxpayer discovers the income was underreported, credits were erroneously claimed or deductions were not allowed, the taxpayer must correct the error within 30 days by completing and filing an amended return and paying the additional tax, applicable penalty, and interest. A summary of interest rates is available on REV–1611, Notice of Interest Calculations [PDF].
• How to File an Amended Return
• To file an amended PA PIT return, use the appropriate return for the tax year you are correcting and clearly print "AMENDED RETURN" at the top. Be sure to fill-in the amended oval at the top of the front side of the PA-40, Individual Income Tax return or PA-40 EZ, Individual Income Tax return. 
  
  Schedule PA-40X, must be submitted with an amended PA-40, Individual Income Tax return. Schedule PA-40X provides the taxpayer and the department with information about the amended return including the specific line changes, amounts of the changes and reason for the changes. Schedule PA-40X is not a return and cannot be filed without the amended PA-40, Individual Income Tax return. 
  

Record Retention

All amounts reported on the PA-40, PA-41, or other returns or schedules filed with the department are subject to verification and audit by the department. A taxpayer must retain books and records for as long as they are relevant. For example, if the taxpayer has an investment in a partnership or S corporation, he or she must retain indefinitely all tax returns and schedules RK-1 and/or NRK-1 to substantiate its basis.

Penalties and Interest

Penalties for Not Filing or Filing a Late Return

The department imposes the penalty from the original due date of the return until the date the taxpayer files the return when: -

• A taxpayer does not file the required PA PIT return on or before the due date; and
• A taxpayer does not file the required PA PIT return on or before the date to which the department recognized or granted an extension of time to file.

For each month or fraction of a month the return is late, the department imposes a penalty of 5 percent of the unpaid tax unless the taxpayer can prove reasonable cause for late filing. The maximum penalty is 25 percent of the unpaid or late-paid tax. The minimum penalty that the department will impose is $5. Any person who attempts to evade or defeat the tax may be prosecuted.

Penalties for Nonpayment or for Late Payment of the Tax

If you do not pay the full amount of your tax due with your return, a 5 percent underpayment penalty will be imposed.

If you fail to report an amount of taxable income that is more than 25 percent of the taxable income shown on your return, an additional penalty of 25 percent of the tax due on the unreported income will be imposed.

These penalties will be imposed if the underpayment of tax is due to negligence or intentional disregard of rules and regulations but without intent to defraud. If any part of any underpayment of the tax is due to fraud, 50 percent of the underpayment will be added to the tax.

Any taxpayer, who files a return which does not contain sufficient information on which to determine the correct liability or which contains information which indicates the liability is significantly incorrect and the return is filed frivolously or in a manner to delay or impede the administration of the tax law, shall pay a $500 penalty.

Any person required to furnish an information return who furnishes a false or fraudulent return shall be subject to a penalty of $250 for each failure.

You may be assessed both a late filing and underpayment penalty if you file your return after the due date (or extended due date) and do not pay your tax liability with your return.

Interest

If you do not pay the tax due on or before the original due date, interest will be calculated from the date the tax was due and payable to the date of actual payment. The annual interest rate is that rate established by the U.S. Secretary of the Treasury and which is in effect on Jan. 1 of each calendar year. A summary of interest rates is available on REV–1611, Notice of Interest Calculations [PDF]. The Act 46 of 2003 change that pays interest on overpayments on business taxes equal to the rate calculated for underpayments minus 2 percent does not apply to Article III of the Tax Reform Code of 1971. Article III applies to individuals, estates, trusts, partnerships (and their partners’ PA PIT), PA S corporations (and their shareholders’ PA PIT), and employer withholding of PA PIT.

Criminal Penalties

In addition to civil penalties, a taxpayer may be subject to criminal prosecution for actions such as:

• Tax evasion;
• Willful failure to file a return, supply information, or pay any tax due;
• Fraud and false statements; or
• Preparing, aiding, and/or assisting in the filing of a fraudulent return.