Volume 16, Number 4 · October 2006

Pennsylvania A Tax-Friendly Climate for Retirees

Nearly 2,000,000 of Pennsylvania's residents are age 65 or older. Some choose retirement locales for the weather or nearness of relatives. But the tax-friendly climate for retirees (including sales, income, death, etc. taxes) makes Pennsylvania a promising retirement residence.

The state income tax is limited in important ways. The 3.07% rate is among the lowest nationally, and unlike many states, it does not extend to pension and social security income. The state sales tax rate is 6%, but unlike many states, Pennsylvania exempts major expenses like food, clothing, shelter, and professional services.

The Governor and state legislature are committed to some form of real property tax relief with the introduction of slots gambling. While the precise form or amount is not yet fixed, reduced taxes on real property seem assured.

Limited income residents may qualify for forgiveness of state income taxes from 10% to 100%. Nearly one in five Pennsylvania households qualify for this benefit, which can be claimed by filing a PA-40 Personal Income Tax Return and completing the PA Schedule SP form while selecting the Tax Forgiveness Credit.

In some states, lottery or gambling revenues are reserved for education or government operations. In Pennsylvania, an extensive lottery system provides income committed to various senior citizen programs and benefits. Among the benefits is the Department of Revenue's Property Tax/Rent Rebate Program which can refund up to $500.00 in real estate property tax or rental charges for those low income residents who qualify. To qualify, annual income must not exceed $15,000.00. However, 50% of Social Security or Railroad Retirement are excluded. Seniors who qualify for the Property/Tax Rent Rebate Program may also qualify for Pennsylvania's PACE or PACENET low cost prescription assistance program.

Finally, TOTAL estate costs in Pennsylvania are very favorable considering both costs and taxes. Probate costs are among the country's lowest and Inheritance tax rates are 0% for spouses, 4.5% for children and grandchildren, 12% for siblings and 15% for others.

Overall, the tax picture in Pennsylvania is indeed friendly for retirees and many senior citizens. Except for an occasionally flooded stream or river, with mild winters like the last one, Pennsylvania is virtually free from natural disasters (hurricanes, tornados, earthquakes, forest or brush fires, dust storms and tsunamis). "There is no place like home in Pennsylvania".

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