Pennsylvania

Pennsylvania PIT operates a class-of-income system (no IRC conformity); capital gains fall in class 3 'Net gains from disposition of property'

“Net gains or income from disposition of property. Net gains or net income, less net losses, derived from the sale, exchange or other disposition of property, including real property, tangible personal property, intangible personal property or obligations issued on or after the effective date of this amendatory act.”

Note: Pennsylvania does not conform to the IRC. §303 lists eight classes of income; gains/losses are computed within class 3 only, with no netting against other classes and no capital-loss carryforward.

Pennsylvania flat personal income tax rate is 3.07% on all taxable income classes (TY2025)

“A tax at the rate of 3.07% is hereby imposed upon each taxable year of every resident individual, estate or trust and each nonresident individual who has income from Pennsylvania sources.”

Note: The 3.07% flat rate is constitutionally uniform (Art. VIII, §1 of PA Constitution). There is no preferential LT capital gain rate in Pennsylvania. School district Earned Income Tax (PSD codes) does NOT reach capital gains it is an earned income / net-profits tax only. Pittsburgh's local earned income tax similarly does not apply to CG.

Pennsylvania year-locks capital losses: same-year, same-class, same-spouse only; zero carryforward

“Net losses from the sale, exchange or other disposition of property, to the extent not offset by gains from the same or other sales, exchanges or other dispositions of property in the same taxable year by the same taxpayer, may not be carried back or carried forward to any other taxable year, and may not be offset against income of a different class.”

Note: Three-dimensional restriction (unique nationally): (1) same year no carryforward; (2) same class a loss on securities cannot offset rental gain (different PA class); (3) same spouse on a MFJ PA return, Spouse A's loss cannot offset Spouse B's gain. The class rule ties for a pure publicly-traded-securities portfolio (all same class). The spouse rule is the silent killer for couples with asymmetric portfolios.

Pennsylvania year-locks capital losses: same-year, same-class, same-spouse only; zero carryforward

“Net losses from the sale, exchange or other disposition of property, to the extent not offset by gains from the same or other sales, exchanges or other dispositions of property in the same taxable year by the same taxpayer, may not be carried back or carried forward to any other taxable year, and may not be offset against income of a different class.”

Note: Three-dimensional restriction (unique nationally): (1) same year no carryforward; (2) same class a loss on securities cannot offset rental gain (different PA class); (3) same spouse on a MFJ PA return, Spouse A's loss cannot offset Spouse B's gain. The class rule ties for a pure publicly-traded-securities portfolio (all same class). The spouse rule is the silent killer for couples with asymmetric portfolios.

PA exempts PA-issued bonds; out-of-state muni bond interest is taxable personal income per PA law

“Interest is not taxable income if received from direct obligations of the Commonwealth of Pennsylvania, its authorities, commissions or other instrumentalities. Interest on obligations of other states, territories and their political subdivisions, and instrumentalities is taxable.”

PA exempts PA-issued bonds; out-of-state muni bond interest is taxable personal income per PA law

“Interest is not taxable income if received from direct obligations of the Commonwealth of Pennsylvania, its authorities, commissions or other instrumentalities. Interest on obligations of other states, territories and their political subdivisions, and instrumentalities is taxable.”

Pennsylvania conforms to IRC §1400Z-2 QOZ gain deferral and exclusion via 72 P.S. §7303(a)(3)(viii)

“The term 'net gains or income' and 'net losses' shall not include gains or income or losses which are excluded from Federal taxation under section 1400Z-2 of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1400Z-2), as amended. Net gains or net income, less net losses, which are excluded under this subparagraph shall be included in income to the extent they are included in gross income under section 1400Z-2(b) of the Internal Revenue Code of 1986, as amended. Section 1400Z-2(c) of the Internal Revenue Code of 1986, as amended, shall apply in the computation of net gains or net income and net losses.”

Note: Verbatim statutory text from 72 P.S. §7303(a)(3)(viii). A Compiler's Note confirms: 'Section 28 of Act 13 of 2019 provided that amendment or addition of subsection (a)(3)(viii) and (5) shall apply to tax years beginning after December 31, 2019.' Confidence upgraded to high: verbatim statutory text confirmed against the Pennsylvania Consolidated Statutes.

Pennsylvania does not conform to IRC §1202 QSBS gain exclusion; QSBS gain fully taxable

“Net gains or income from disposition of property. Net gains or net income, less net losses, derived from the sale, exchange or other disposition of property, including real property, tangible personal property, intangible personal property or obligations issued on or after the effective date of this amendatory act by the Commonwealth;”

Note: 72 P.S. §7303(a)(3) taxes net gains from the sale, exchange, or other disposition of property; the section enumerates specific IRC incorporations and §1202 is absent, so federally excluded QSBS gain is fully taxable in Pennsylvania. Corroboration (unciteable host): the PA DOR online answer 3885 at revenue-pa.custhelp.com states 'Pennsylvania does not have any provision similar to IRC 1202 that would allow gain from a sale of stock to be excluded from taxable income.'

PA PIT Guide explicitly lists FNMA and FHLMC under 'Not Exempt from PA PIT' with their federal charter citations

“Obligations of Federal Agencies, Instrumentalities and Territories Not Exempt from PA PIT: Federal Home Loan Mortgage Corporation, 12 USC § 1455(a). Federal National Mortgage Association (Fannie Mae), 12 USC §§ 1719(e) and 1723a(c).”

Note: The PA PIT Guide Interest chapter maintains a two-column table: 'Exempt' vs 'Not Exempt.' FHLB appears in the Exempt column (federal preemption under 12 U.S.C. §1433). FNMA and FHLMC appear in 'Not Exempt' with their respective federal charter citations, noting that the charter exempts the corporations themselves, not bondholder interest.

Pennsylvania flat personal income tax rate is 3.07% on all taxable income classes (TY2025)

“A tax at the rate of 3.07% is hereby imposed upon each taxable year of every resident individual, estate or trust and each nonresident individual who has income from Pennsylvania sources.”

Note: The 3.07% flat rate is constitutionally uniform (Art. VIII, §1 of PA Constitution). There is no preferential LT capital gain rate in Pennsylvania. School district Earned Income Tax (PSD codes) does NOT reach capital gains it is an earned income / net-profits tax only. Pittsburgh's local earned income tax similarly does not apply to CG.

U.S. Treasury interest exempt from Pennsylvania income tax: 31 U.S.C. §3124(a) prohibits state taxation of U.S. government obligations

“Stocks and obligations of the United States Government are exempt from taxation by a State or political subdivision of a State. The exemption applies to each form of taxation that would require the obligation, the interest on the obligation, or both, to be considered in computing a tax.”

Note: 31 U.S.C. §3124(a) preempts state income taxation of U.S. government obligations. Covers T-bills, T-notes, T-bonds, TIPS, and I-bonds. Most states allow a deduction or subtraction by statute cross-referencing this federal preemption.

FHLB and FFCB bond interest exempt from Pennsylvania income tax: federal enabling statutes mandate state tax exemption

“Any security issued under this chapter by a Federal home loan bank, including the stock thereof, shall be exempt from taxation, except taxes upon real estate, by any State, county, municipality, or local taxing authority.”

Note: 12 U.S.C. §1433 (FHLB) and 12 U.S.C. §2023 (FFCB/Farm Credit Act) both mandate state tax exemption for securities issued under their chapters. Contrasts with FNMA (12 U.S.C. §§1719(e), 1723a(c)) and FHLMC (12 U.S.C. §1455(a)) which have no bondholder exemption statute and whose interest is taxable by income-tax states.

Farm Credit Act: notes, bonds, debentures, and other obligations of Farm Credit Banks are instrumentalities of the United States exempt from all State, municipal, and local taxation

“The mortgages held by the Farm Credit Banks and the notes, bonds, debentures, and other obligations issued by the banks shall be considered and held to be instrumentalities of the United States and, as such, they and the income therefrom shall be exempt from all Federal, State, municipal, and local taxation, other than Federal income tax liability of the holder thereof under the Public Debt Act of 1941 (31 U.S.C. 3124).”

Note: 12 U.S.C. §2023 explicitly covers 'the income therefrom' (i.e., interest payments to bondholders), exempting it from all State and local taxation. The only carve-out is federal income tax on the holder. Parallel to 12 U.S.C. §1433 (FHLB Act), which exempts FHLB securities from state taxation. Together §1433 and §2023 mandate state and local tax exemption for both FHLB and FFCB bond interest. Shared across all jurisdictions: a single object reference satisfies buildCitationIndex() identity check.

Pennsylvania flat personal income tax rate is 3.07% on all taxable income classes (TY2025)

“A tax at the rate of 3.07% is hereby imposed upon each taxable year of every resident individual, estate or trust and each nonresident individual who has income from Pennsylvania sources.”

Note: The 3.07% flat rate is constitutionally uniform (Art. VIII, §1 of PA Constitution). There is no preferential LT capital gain rate in Pennsylvania. School district Earned Income Tax (PSD codes) does NOT reach capital gains it is an earned income / net-profits tax only. Pittsburgh's local earned income tax similarly does not apply to CG.

Pennsylvania inheritance tax: 0% spouse; 4.5% direct descendants; 12% siblings; 15% others (TY2025)

“The rates for Pennsylvania inheritance tax are as follows: 0 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger; 4.5 percent on transfers to direct descendants and lineal heirs; 12 percent on transfers to siblings; and 15 percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax.”

Note: Pennsylvania inheritance tax applies to transfers at death. No Pennsylvania estate tax. Direct descendants (children, grandchildren, parents) taxed at 4.5%. Spouses exempt (0%). Siblings at 12%. All other heirs at 15%. Agricultural property exempted under certain conditions (Act 85 of 2012). Military decedents exempt.

Pennsylvania flat personal income tax rate is 3.07% on all taxable income classes (TY2025)

“A tax at the rate of 3.07% is hereby imposed upon each taxable year of every resident individual, estate or trust and each nonresident individual who has income from Pennsylvania sources.”

Note: The 3.07% flat rate is constitutionally uniform (Art. VIII, §1 of PA Constitution). There is no preferential LT capital gain rate in Pennsylvania. School district Earned Income Tax (PSD codes) does NOT reach capital gains it is an earned income / net-profits tax only. Pittsburgh's local earned income tax similarly does not apply to CG.

Pennsylvania year-locks capital losses: same-year, same-class, same-spouse only; zero carryforward

“Net losses from the sale, exchange or other disposition of property, to the extent not offset by gains from the same or other sales, exchanges or other dispositions of property in the same taxable year by the same taxpayer, may not be carried back or carried forward to any other taxable year, and may not be offset against income of a different class.”

Note: Three-dimensional restriction (unique nationally): (1) same year no carryforward; (2) same class a loss on securities cannot offset rental gain (different PA class); (3) same spouse on a MFJ PA return, Spouse A's loss cannot offset Spouse B's gain. The class rule ties for a pure publicly-traded-securities portfolio (all same class). The spouse rule is the silent killer for couples with asymmetric portfolios.