The short answer
Generally no. Pennsylvania does not tax Social Security, and it generally does not tax pensions, 401(k)s, or IRA withdrawals once you are retired and past the plan’s retirement conditions or age 59½. It does tax interest, dividends, and capital gains at a flat 3.07%.
| Type of retirement income | Pennsylvania income tax |
|---|---|
| Social Security | Not taxed |
| Pensions and 401(k), 403(b), 457 payments after you retire under the plan’s terms | Generally not taxed |
| IRA distributions at age 59½ or older | Generally not taxed |
| IRA distributions before 59½ | Taxed on the amount above your contributions |
| Interest, dividends, and capital gains | Taxed at 3.07% |
| Wages, consulting, or business income in retirement | Taxed at 3.07%, plus any local earned income tax |
Sources: Pennsylvania Department of Revenue guidance, including publication REV-636 on IRAs. Federal income tax applies separately.
Social Security
Social Security benefits are not subject to Pennsylvania personal income tax, regardless of your income. That matters most for higher earners, because up to 85% of benefits can still be taxable on the federal return.
Pensions, 401(k)s, and other employer plans
Payments from an employer-sponsored retirement plan are generally exempt once you have met the plan’s conditions for retirement, such as its age or years-of-service requirement, and have actually retired. Payments taken before then, for example from a former employer’s plan while you are still working elsewhere, can be partly taxable. Pennsylvania taxed your contributions when you made them, so the taxable portion is generally limited to the amount above what you put in.
How Pennsylvania taxes IRAs: the age 59½ rule
IRA withdrawals are generally not taxable in Pennsylvania once you reach 59½. Before that age, the part of a distribution that exceeds your contributions can be taxable, using a cost-recovery calculation.
| Pennsylvania IRA rules at a glance | PA income tax |
|---|---|
| Traditional IRA contributions | Not deductible on the PA return, so they become your PA basis |
| Withdrawals at 59½ or older, including RMDs | Generally not taxed |
| Withdrawals before 59½ | Taxed on the amount above your contributions |
| Traditional-to-Roth conversion (direct transfer or 60-day rollover) | Generally not taxed |
| Part of a conversion kept out of the Roth, such as tax withheld | Treated as a distribution; taxable if under 59½ |
Source: Pennsylvania Department of Revenue, REV-636. Simplified; federal rules differ.
Two details catch people:
- Pennsylvania does not follow the federal exceptions. A withdrawal that avoids the federal 10% penalty, such as substantially equal periodic payments, can still be taxable for Pennsylvania if you are under 59½.
- Early retirees should plan the order of withdrawals. If you retire at 55, drawing first from taxable accounts or an employer plan that allows penalty-free access under the Rule of 55, and waiting on IRA withdrawals until 59½, can avoid Pennsylvania tax on those IRA dollars.
What Pennsylvania does tax
Interest, dividends, and capital gains are taxed at the flat 3.07% rate, with no lower rate for long-term gains. Pennsylvania also has no capital loss carryforward: a net loss in one year cannot offset gains in the next. For retirees living on a taxable portfolio, investment income is usually the main Pennsylvania tax. Our guide to tax drag explains how to measure and reduce it. For how Treasuries, municipal bonds, and corporates compare after Pennsylvania tax, see our bond investing guide.
Local earned income taxes apply to wages and self-employment income, not to retirement plan distributions or investment income.
A worked example
A married couple, ages 68 and 66, living in Chester County and fully retired:
| Income source | Amount | PA tax |
|---|---|---|
| Social Security (both spouses) | $52,000 | $0 |
| Pension | $40,000 | $0 |
| IRA withdrawals (both over 59½) | $80,000 | $0 |
| Interest, dividends, and realized gains | $30,000 | $921 |
| Total | $202,000 | $921 |
On $202,000 of income, their Pennsylvania income tax is about $921, an effective rate under 0.5%. Their federal income tax is a separate and much larger calculation.
Hypothetical and simplified for illustration; assumes the pension is paid after the plan’s retirement conditions were met. Actual results depend on your facts.
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| Pennsylvania | New Jersey | Delaware | Florida | |
|---|---|---|---|---|
| Social Security | Not taxed | Not taxed | Not taxed | No income tax |
| Pensions and IRAs | Generally not taxed in retirement | Taxed; exclusion for ages 62+ with income of $150,000 or less | Taxed; partial exclusion from age 60 | No income tax |
| Investment income | Flat 3.07% | Graduated rates | Graduated rates | No income tax |
| Inheritance tax | Yes; 0% to a spouse, 4.5% to children | Yes, but not on spouses, children, grandchildren, or parents | No | No |
| State estate tax | No | No | No | No |
Simplified summary; each state has additional rules, thresholds, and property and sales tax differences. Confirm current law before making a move.
For many retirees with mostly retirement-plan income, Pennsylvania’s income tax is already close to zero, so moving to a no-income-tax state saves less than people expect. The bigger differences are usually property taxes, cost of living, and inheritance tax. See our Pennsylvania inheritance tax guide for how that works.
Planning ideas for Pennsylvania retirees
Before 59½
Sequence early withdrawals
Fund the years before 59½ from taxable savings or an eligible employer plan rather than IRAs to avoid Pennsylvania tax on early IRA withdrawals.
Federal brackets
Roth conversions
Pennsylvania generally does not tax IRA distributions after 59½, which keeps the focus of a conversion plan on federal brackets and Medicare thresholds. See our Roth conversion guide.
Taxable accounts
Manage investment income
Because only investment income is taxed, asset location and tax-efficient funds reduce what is left of your Pennsylvania bill.
Legacy
Plan for inheritance tax
IRAs left to children are generally subject to the 4.5% inheritance tax and later to federal income tax. Beneficiary choices and lifetime conversions can change that.
Frequently asked questions
Does Pennsylvania tax retirement income?
Generally no. Pennsylvania does not tax Social Security benefits, and it generally does not tax pension, 401(k), 403(b), or 457 payments received after you meet your plan’s retirement conditions and retire, or IRA distributions taken after age 59½. Pennsylvania does tax interest, dividends, and capital gains at its flat 3.07% rate.
Does Pennsylvania tax Social Security?
No. Social Security benefits are not subject to Pennsylvania personal income tax.
Does Pennsylvania tax 401(k) withdrawals?
Generally not once you retire. Payments from a 401(k), 403(b), or 457 plan are generally exempt from Pennsylvania income tax after you meet the plan’s conditions for retirement, such as its age or years-of-service requirement, and have actually retired. Withdrawals taken before then can be partly taxable, generally on the amount above your own contributions, because Pennsylvania taxed those contributions when you made them.
Does Pennsylvania tax pensions?
Generally no. Pension payments from an employer-sponsored plan are generally exempt from Pennsylvania income tax once you have met the plan’s retirement conditions and retired. Payments received before then, for example while you are still working elsewhere, can be partly taxable.
Does Pennsylvania tax IRA withdrawals?
IRA distributions are generally not taxable in Pennsylvania once you reach age 59½. Distributions taken before 59½ can be taxable to the extent they exceed your contributions, because Pennsylvania taxed those contributions when they were made. Pennsylvania does not follow the federal exceptions to the early-withdrawal penalty.
Does Pennsylvania tax Roth IRA conversions?
Generally no. According to the Pennsylvania Department of Revenue, money moved from a traditional IRA to a Roth IRA by trustee-to-trustee transfer or a 60-day rollover is generally not subject to Pennsylvania personal income tax. Any amount taken out and not converted, such as federal tax withheld from the conversion, is treated as a distribution and can be taxable in Pennsylvania if you are under 59½.
Is Pennsylvania a tax-friendly state for retirees?
For most retirees, yes. Pennsylvania exempts Social Security and most retirement plan income and taxes other income at a flat 3.07%. The main trade-offs are property taxes, which vary widely by school district, and Pennsylvania’s inheritance tax, which applies to most transfers to children and other heirs other than a spouse.