Skip to Content
Schedule a Discovery Meeting

Financial planning in Pennsylvania

A flat-fee financial advisor serving Pennsylvania.

A flat 3.07% that never touches retirement income, and an inheritance tax of 4.5% to 15% that does.

Schedule a Discovery MeetingView Pricing
Flat 3.07%, no standard deductionPennsylvania income tax, tax year 2026.
Inheritance tax: 0% to a spousePennsylvania estate tax.
$150–$1,650/qtrFlat quarterly memberships, no AUM fee, no annual commitment.
Minnetonka-basedA Minnesota firm serving Pennsylvania households virtually; no Pennsylvania office is claimed.

Direct answer

What Is Different About Financial Planning in Pennsylvania?

Pennsylvania taxes eight classes of income at a flat 3.07% with no standard deduction, and taxes 401(k) contributions on the way in rather than the way out: Social Security, pensions, 401(k) and IRA distributions after 59½, and trustee-to-trustee Roth conversions carry no state tax. What Pennsylvania does have is an inheritance tax on what each heir receives: nothing for a spouse, 4.5% for children and grandchildren, 12% for siblings and 15% for everyone else, with a 5% discount for paying within three months. For a Philadelphia or Pittsburgh household the income-tax plan is federal-only and the estate plan is about the inheritance tax.

Pennsylvania tax treatment

How Pennsylvania taxes a planning household

Figures are for tax year 2026, each read from the source beside it. Thresholds and rates are revised regularly; confirm the current year before acting on any of them. What these rules change in a household’s plan, from the order accounts are drawn to the timing of Roth conversions, is set out in the retirement tax planning overview.

Income: Flat 3.07%, no standard deduction; retirement-plan contributions taxed when made

Pennsylvania taxes compensation, interest, dividends, business profits, gains on property, rents and royalties, estate and trust income and gambling winnings at 3.07%, with no standard deduction or personal exemption and no lower rate for capital gains. Unlike federal law, contributions to a 401(k) or 403(b) are taxable compensation in the year made, which is why qualified distributions later come out Pennsylvania tax-free.

Source

Retirement income: Social Security, pensions, 401(k)s and IRAs after 59½ untaxed; a trustee-to-trustee Roth conversion is untaxed at any age

Pennsylvania does not tax Social Security, or commonly recognized retirement benefits paid from an eligible employer plan once the plan's age or service requirement is met and you have retired. IRA and Roth IRA distributions received on or after age 59½, or at death, are not taxable; earlier distributions are taxable only to the extent they exceed previously taxed contributions. A traditional-to-Roth conversion done trustee-to-trustee, or fully redeposited within 60 days, is not taxable in Pennsylvania at any age.

Source

Estates: Inheritance tax: 0% to a spouse, 4.5% lineal heirs, 12% siblings, 15% others

Pennsylvania's death tax is an inheritance tax on what each heir receives: 0% to a surviving spouse and on transfers between a parent and a child aged 21 or younger, 4.5% to children, grandchildren, parents and grandparents, 12% to siblings and 15% to everyone else, with charities exempt. Life insurance on the decedent is not taxed. The tax is due at death and delinquent after nine months; paying within three months earns a 5% discount.

Source

Worth doing here

Planning opportunities specific to Pennsylvania

Things that are worth doing in Pennsylvania that would not be worth doing, or would work differently, somewhere else.

Roth conversions and retirement withdrawals carry no state tax

With retirement distributions after 59½ and trustee-to-trustee conversions untaxed, a Pennsylvania resident's conversion decision has no 3.07% layer: only the federal bracket, Medicare tiers and Social Security taxation matter. The trade-off was paid earlier, because 401(k) and 403(b) contributions were taxed going in.

Source

Gifts made more than a year before death escape the inheritance tax

An outright lifetime gift completed more than one year before death is not reported on the inheritance-tax return, saving 4.5% on transfers to children and 12% or 15% to siblings and others. Gifts within one year of death are pulled back, less a $3,000 exclusion per recipient per calendar year, so a giving programme has to start early.

Source

The 529 and ABLE deduction equals the federal gift exclusion

Pennsylvania allows a deduction for 529 contributions up to the federal annual gift-tax exclusion per beneficiary, per taxpayer ($19,000 in 2025 and 2026), and the same for PA ABLE contributions per contributor, worth 3.07% of the amount deducted.

Source

Philadelphia's wage tax reaches earnings, not pensions

Philadelphia residents pay a wage tax of 3.735% on salaries, wages and other compensation from July 1, 2026 (3.74% in the prior fiscal year); non-residents working in the city pay 3.425%. The City's list of income not subject to the tax includes pension payments, so a retiree's income is taxed by neither the Commonwealth nor the City.

Source

Federal and state, together

How Pennsylvania Tax Interacts With Your Federal Return

At 3.07% the state income tax is modest and property tax is often the larger state-and-local item, so for most households the federal deduction cap does not bind. In retirement the state income-tax layer is gone entirely, and the plan is federal-only apart from the inheritance tax.

The federal deduction for state and local taxes is $40,400 for tax year 2026 and begins to shrink above $500,000 of modified adjusted gross income, down to a floor of $10,000, and is scheduled to return to $10,000 after 2029. The federal estate tax exclusion is $15,000,000 per person for deaths in 2026. IRS, Instructions for Schedule A (2025), line 5e; IRS, tax year 2026 inflation adjustments (Rev. Proc. 2025-32).

Cities

Where we work with Pennsylvania households

Each city page covers what is local — how households there tend to be paid, what the first meeting usually covers — and inherits this state layer.

Philadelphia, PA

Philadelphia is paid by Comcast's headquarters, by the University of Pennsylvania and Penn Medicine, Jefferson and the region's other health systems, by the pharmaceutical corridor that runs from the city into the suburbs, by financial services including the privately held Vanguard in Malvern, and by the law and professional firms of a large legal market.

Philadelphia planning

Pittsburgh, PA

Pittsburgh's largest employers are UPMC and Highmark, the University of Pittsburgh and Carnegie Mellon, and a group of public headquarters that includes PNC, PPG and Wabtec, with a robotics and technology sector grown out of the universities.

Pittsburgh planning

Watch and learn

Financial Planning, Explained Clearly

Start with three videos selected for this page, then use the controls to explore every published Flames FP video guide.

Videos 1–3 of 14

Common questions

Pennsylvania Financial Planning Questions

Does Pennsylvania tax retirement income?

No. Social Security, pensions and 401(k) distributions after retirement, and IRA distributions received at or after 59½ are not taxed by Pennsylvania. Early distributions are taxable only to the extent they exceed previously taxed contributions.

Does Pennsylvania tax Roth conversions?

Not when the conversion is made trustee-to-trustee or the full amount, including any tax withheld, is redeposited within 60 days, at any age. Only an amount not transferred, and only above basis, would be taxable.

What is the Pennsylvania inheritance tax?

A tax on what each heir receives: 0% to a surviving spouse, 4.5% to children, grandchildren, parents and grandparents, 12% to siblings and 15% to others, with charities exempt and a 5% discount for paying within three months of death.

Does Flames Financial Planning have an office in Pennsylvania?

No. Flames Financial Planning is based in Minnetonka, Minnesota, and serves Pennsylvania households through a virtual planning relationship. This page describes the service area and does not claim a Pennsylvania office.

Is Pennsylvania tax planning part of the relationship?

Yes. State tax treatment shapes withdrawal order, Roth-conversion timing, and where investments are best held. Planning includes tax guidance and review of a completed return; Premier adds tax projections and preparation and filing through an independent tax partner.

Next step

See what a flat-fee relationship would cost a Pennsylvania household.

A discovery meeting covers your situation, what you pay now, and whether a fixed quarterly membership is a better fit.

Schedule a Discovery MeetingAll States and Cities