Pennsylvania’s state income tax is low and flat, but the state has something most others don’t: local earned income taxes collected by your municipality and school district — and in Philadelphia, a separate set of city business taxes. Here is how the layers work for freelancers.
What you pay on freelance profit
| Tax | Rate |
|---|---|
| Federal self-employment tax | 15.3% on 92.35% of profit |
| Federal income tax | 10%–37% |
| Pennsylvania personal income tax | Flat 3.07% |
| Local earned income tax (outside Philadelphia) | Set locally — often around 1%–2% combined |
| Local Services Tax | Up to $52 a year where levied |
| Philadelphia Net Profits Tax | 3.735% for residents, 3.425% for non-residents (2026) |
Pennsylvania’s 3.07%
Pennsylvania taxes income at a flat 3.07%, a rate unchanged since 2004. It works differently from federal tax in two ways:
- No standard deduction or personal exemption. Tax applies from the first dollar of taxable income (low-income households can qualify for Tax Forgiveness).
- Its own income rules. Business profit is reported on PA Schedule C under Pennsylvania’s rules, which don’t always match federal ones. Many federal deductions — including the QBI deduction — have no Pennsylvania equivalent.
Estimated payments: the threshold just changed
You must make Pennsylvania estimated payments if you expect income not subject to withholding — such as freelance profit — above a threshold that is rising quickly:
| Tax year | Income not subject to withholding |
|---|---|
| 2025 | $11,000 |
| 2026 | $14,000 |
| 2027 | $17,000 |
| 2028 | $20,000 |
Many older guides still say $8,000, which applied through 2023. To avoid a penalty, pay the smaller of 90% of this year’s tax or 100% of last year’s (if you filed a full-year return). Due dates match the IRS: April 15, June 15 and September 15, 2026, and January 15, 2027.
Local earned income tax
Most Pennsylvania municipalities and school districts levy an earned income tax that applies to net profits from self-employment, not just wages. The combined rate depends on where you live — often around 1% to 2%. Employers withhold it from wages, but freelancers usually pay it directly to their local tax collector, often with quarterly estimates. Find your rate and collector through the Department of Community and Economic Development’s municipal tax lookup.
Philadelphia: Net Profits Tax and BIRT
Philadelphia replaces the local earned income tax with its own taxes:
- Net Profits Tax (NPT): 3.735% of net profits for residents and 3.425% for non-residents in 2026. You must file an NPT return even in a year with no profit.
- Business Income & Receipts Tax (BIRT): for 2026, 5.65% of net income plus 1.395 mills (0.1395%) of gross receipts. You can apply 60% of the BIRT you pay on the net income portion as a credit against the NPT. Very small businesses can be exempt from BIRT; check the city’s current rules.
Philadelphia freelancers face one of the highest combined tax loads in the country, so it is worth getting a local preparer.
How much to set aside
Outside Philadelphia, enter 3.07% plus your local EIT rate (for example 4.5% total) in the state field of the tax set-aside calculator. In Philadelphia, add the NPT as well. Size your federal estimates with the quarterly calculator.