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Pennsylvania taxes for delivery and rideshare drivers (2026)

By Jin JeongUpdated Checked against IRS and PA Department of Revenue sources

Pennsylvania's rate looks low, a flat 3.07%, but the base is wide: no standard deduction, no deduction for half your self-employment tax, and no tips deduction. Add a local earned income tax outside Philadelphia, or the Net Profits Tax and BIRT inside it, and the state-and-local bill is closer to 4% of profit, or more, than 3%.

This guide is organized by layer, because Pennsylvania drivers pay in layers that are collected by different agencies on different dates. Run your own numbers through the 1099 gig tax calculator and type the combined rate you find below; the pre-filled figure covers the state only.

Key numbers

ItemWhat applies
State income tax rateFlat 3.07%
Standard deduction or exemptionNone. Federal deductions are not allowed
Half of self-employment taxNot deductible for Pennsylvania
Federal tips deductionNot allowed
Estimated tax trigger (2026)$430 of tax, equal to $14,000 of income without withholding
Estimated tax formPA-40 ES (I), paid through myPATH
Local earned income taxGenerally up to 1% combined; Philadelphia differs
Philadelphia (2025 rates)Net Profits Tax 3.74% resident, 3.43% nonresident; BIRT 1.410 mills on gross receipts and 5.71% on net income

Layer 1: the state, and why the base is wide

Pennsylvania taxes eight classes of income separately and does not start from federal AGI. For a gig driver the relevant class is net profit from a business, and the Department of Revenue's guide lists what changes against the federal calculation. You may not deduct one-half of self-employment tax. Bonus depreciation is not allowed. The business portion of your car's operating cost is deductible. The guide does not mention the IRS mileage rate, so our example assumes your federal mileage deduction carries over; confirm that with the Department if mileage is your biggest deduction. For individuals the guide says Pennsylvania law does not allow a deduction for personal expenses or federal standard or itemized deductions.

Here is what that does to one driver, using the same engine as the calculator. Gross receipts are $47,000 including $5,200 of tips, with 6,000 business miles in the first half of 2026, 6,500 in the second, and $1,000 of other expenses. Net profit is $36,710.00. Federal AGI is $34,116.52, lower by $2,593.48, the deductible half of self-employment tax. Pennsylvania taxes the larger figure, so the tax is $36,710.00 × 3.07%, or $1,127.00.

That is an effective rate of 3.30% of federal AGI, higher than 3.07% because the base is not reduced. Pennsylvania also taxes all $5,200 of tips, even though the engine allows a $5,200 federal tips deduction.

Layer 2: the local earned income tax

Outside Philadelphia, municipalities and school districts levy an earned income tax under the Local Tax Enabling Act, and it applies to net profits of the self-employed. The Department of Community and Economic Development's Act 32 manual says municipalities and school districts adopting income taxes under that act are generally limited to a combined one percent, shared half and half when both levy it. Rates differ by address, so use DCED's address lookup at dced.pa.gov/Act32 to find your rate and the collector who will send the annual return.

At the assumed 1% the example driver adds $367.10 of local tax. State plus local comes to $1,494.10, and the engine puts total tax at $7,706.38, a set-aside of 16.4% of gross. Local taxes are not paid on the state's schedule. Pay close attention to the notices from your local collector, because they run separately from the PA-40.

Layer 3: Philadelphia

Philadelphia drivers pay differently. The City's Revenue Department says a person with a Form 1099 from Philadelphia clients is a business, and that unincorporated businesses file both the Business Income and Receipts Tax and the Net Profits Tax. The NPT is the personal-income-style tax on your net profit: 3.74% for residents and 3.43% for nonresidents for tax year 2025, with all income of residents taxed wherever earned and nonresidents taxed on profit earned in Philadelphia. It is due with the annual return on April 15, and estimates are due April 15 and June 15, each 25% of the prior year's NPT.

Run the example driver as a resident: Pennsylvania $1,127.00 plus NPT at the 2025 resident rate of $1,372.95 is $2,499.95, and total tax rises to $8,712.23. The BIRT is the new surprise. Starting with tax year 2025 Philadelphia no longer exempts the first $100,000 of receipts, so every business must file, at 1.410 mills on gross receipts and 5.71% on taxable net income, though a credit worth 60% of the net income portion reduces your NPT. Only your Philadelphia-sourced receipts count. Because the interaction is complicated, the City itself recommends working with a tax professional who understands your business, and the example above leaves BIRT out.

Estimated payments

The 2026 REV-413 (I) instructions say you must make estimated payments if you can expect to owe at least $430, which they equate to $14,000 of income not subject to withholding, and your withholding and credits will be below the smaller of 90% of 2026 tax or 100% of 3.07% of your 2025 PA taxable income (only if you filed a full-year 2025 PA-40). The threshold was $8,000 through 2023 and rises to $17,000 in 2027 and $20,000 in 2028. For a driver who starts in January the installments are 25% each, due April 15, June 15, September 15, and January 15, 2027; if you first cross the threshold later, there are fewer installments with larger percentages. The example driver owes about $281.75 to Pennsylvania each quarter before local tax. File through myPATH or mail PA-40 ES vouchers. For the federal side see the quarterly payment guide.

Crossing the border

If you live in New Jersey, Ohio, Maryland, or another reciprocal state and deliver into Pennsylvania, the Department's instructions say its estimated tax rules cover nonresidents with Pennsylvania-source income and specifically include self-employment earnings whether or not the nonresident lives in a reciprocal state. Reciprocity helps employees. If you live in New Jersey, our New Jersey guide covers the credit you claim at home for tax paid to Pennsylvania. Pennsylvania also tells payers that file 1099-NEC or 1099-MISC for Pennsylvania-source payments to nonresidents to withhold, though withholding is optional below $5,000 a year, per Personal Income Tax Bulletin 2023-01, and it says it does not require most 1099s otherwise. Federal 1099 thresholds still govern what you receive; see the thresholds guide.

General information for tax year 2026, not tax advice.

New York and Ohio also layer local taxes on the state's, as the New York guide and the Ohio guide explain.

Frequently asked questions

What is the Pennsylvania income tax rate for 2026?

A flat 3.07%. The Department of Revenue's 2026 estimated tax instructions multiply expected taxable income by 3.07 percent. There is no standard deduction and no personal exemption, so the first dollar of net profit is taxed at the full rate.

Can I deduct half of my self-employment tax on the PA-40?

No. The Department of Revenue's guidance on business income says a taxpayer may not deduct one-half of self-employment tax for Pennsylvania purposes, even though the IRS allows it. Pennsylvania also does not allow bonus depreciation. Your Pennsylvania net profit is therefore a bit higher than your federal adjusted gross income.

Does Pennsylvania follow the federal tips deduction?

No. Pennsylvania computes its own income and the Department of Revenue says Pennsylvania law does not allow a deduction for federal itemized or standard deductions, or personal expenses. Tips from customers are included in income, and we found no enacted Pennsylvania deduction for them. The federal deduction lowers only your federal bill.

Do I have to make Pennsylvania estimated payments?

Yes if you can reasonably expect to owe at least $430 of tax, which is $14,000 of income not subject to employer withholding, after withholding and credits (2026 figures). The threshold rises to $17,000 in 2027 and $20,000 in 2028. Net profit from driving is income without withholding, so most full-time drivers cross it.

I live in New Jersey or Ohio and deliver in Pennsylvania. Do I owe Pennsylvania tax?

Probably yes on the profit earned in Pennsylvania. The Department of Revenue's estimated tax instructions say the rules apply to nonresidents who expect taxable income from Pennsylvania sources, and they list earnings from self-employment by residents or nonresidents regardless of whether the nonresident lives in a reciprocal state. Reciprocal agreements cover employee compensation, not self-employment profit.

Is there a local tax outside Philadelphia?

Usually yes. Local earned income taxes apply to net profits of the self-employed. Under the Local Tax Enabling Act, a municipality and school district generally share a combined cap of one percent, and the Department of Community and Economic Development publishes an address lookup for your exact rate and collector. Philadelphia has no such cap and uses its own taxes.

Sources