Pennsylvania Capital Gains Tax (2026)
Pennsylvania capital gains tax rate: Taxed as ordinary income at 3.07%
Pennsylvania taxes capital gains as ordinary income at the flat 3.07% rate. Interestingly, Pennsylvania does not recognize the federal capital loss carryforward — losses can only offset gains in the same year, making PA treatment stricter than federal rules.
Federal Capital Gains Rates Still Apply to Pennsylvania Residents
All Pennsylvania residents also owe federal capital gains tax. Federal long-term capital gains rates are 0% (income up to ~$47,025 single), 15% (income up to ~$518,900 single), or 20% (above). High earners may also owe the 3.8% Net Investment Income Tax (NIIT).
Short-Term vs. Long-Term Capital Gains in Pennsylvania
Assets held less than one year are taxed as ordinary income at federal rates (10%–37%). Assets held over one year qualify for the preferential 0%/15%/20% federal rates. Pennsylvania taxes capital gains as ordinary income at the flat 3.07% rate. Interestingly, Pennsylvania does not recognize the federal capital loss carryforward — losses can only offset gains in the same year, making PA treatment stricter than federal rules.
Planning Considerations for Pennsylvania Investors
- Tax-loss harvesting can offset gains at both state and federal levels
- Timing asset sales to control income year and bracket placement
- Pennsylvania taxes capital gains at Taxed as ordinary income at 3.07% — factor this into net-of-tax return calculations
- Qualified Opportunity Zone investments can defer federal and potentially state gains
Frequently Asked Questions
What is the capital gains tax rate in Pennsylvania?
Pennsylvania taxes capital gains as ordinary income at the flat 3.07% rate. Interestingly, Pennsylvania does not recognize the federal capital loss carryforward — losses can only offset gains in the same year, making PA treatment stricter than federal rules. Federal rates (0%, 15%, 20% for long-term gains) also apply regardless of state.
Does Pennsylvania have a different rate for long-term vs. short-term capital gains?
Pennsylvania does not distinguish between short- and long-term capital gains — both are taxed as ordinary income at up to 3.07% flat. Only federal law provides preferential long-term capital gains rates.
How do I reduce capital gains tax in Pennsylvania?
Strategies include: holding assets over one year for federal long-term rates, tax-loss harvesting to offset gains, contributing to retirement accounts (401k, IRA), investing in Qualified Opportunity Zones, and timing sales across tax years. In Pennsylvania, capital gains are taxed at up to Taxed as ordinary income at 3.07%, so these strategies reduce both federal and state tax.
Is this capital gains tax calculator free for Pennsylvania?
Yes. Enter your gain amount, holding period, and annual income. The calculator applies both federal rates (0%/15%/20% long-term) and Pennsylvania's Taxed as ordinary income at 3.07% state rate to estimate your total tax owed.