Rental Property Taxes in Pennsylvania (2026 Guide)

1. Property Tax in Pennsylvania

Pennsylvania has no state-level property tax — it is levied independently by the county, the municipality, and the school district, each setting its own millage. The statewide average effective rate is around 1.4%, but it ranges widely by county (roughly 0.9%–2.5%).

• Base-year assessment + Common Level Ratio — counties don’t reassess annually; each uses a "base year," and the State Tax Equalization Board certifies a Common Level Ratio (CLR) per county used in appeals. Assessments can drift far from market value.
• No homestead relief for rentals — the Homestead/Farmstead Exclusion requires an owner’s permanent primary residence, so it never applies to investment property.

2. Pennsylvania State Income Tax on Rental Income

Pennsylvania taxes income at a flat 3.07% (72 P.S. §7302), unchanged since 2004. But PA handles rental income very differently from the federal return: you report it on PA-40 Schedule E ("Rents and Royalty Income"), and PA explicitly does not let you use the federal Schedule E figure.

• No passive-loss rules — PA has no equivalent of IRC §469, so rental losses are claimed in full rather than suspended or carried forward.
• But losses are siloed to the class — a net rental loss can offset another rental property within the rents/royalties class, but it cannot offset other classes of PA income (like wages) and cannot be carried to another year.
• No capital-gains preference — a sale is reported on PA Schedule D and taxed at the same flat 3.07%.

3. Depreciation: No Bonus, but §179 Conforms

Pennsylvania allows depreciation (including federal MACRS methods) but disallows federal bonus depreciation (§168(k)) — assets you bonus-depreciated federally must be depreciated using a regular method for PA.

• §179 expensing conforms — since January 1, 2023, Pennsylvania follows the federal §179 limits (the old $25,000 PA cap is obsolete).
• Bonus assets use the regular schedule — so a cost-segregation study still helps federally, but the front-loaded bonus piece is spread out for PA.

4. Realty Transfer Tax

Pennsylvania charges a 1% state realty transfer tax (72 P.S. §8102-C), and most localities add their own — typically another ~1%, so ~2% total in many areas (split by custom between buyer and seller).

5. LLC Annual Report and Fees

Pennsylvania introduced an annual report for LLCs under Act 122 of 2022, with the first reports due in 2025. The fee is just $7, and for LLCs it’s due by September 30 each year.

• No franchise/capital-stock tax — PA eliminated its capital stock and foreign franchise tax for years beginning in 2016, so an LLC owes no annual franchise tax.
• 2026 grace — the report is required, but failure to file does not trigger administrative dissolution until the 2027 cycle.

6. Rent Control

Pennsylvania has no statewide rent control, and no Pennsylvania municipality currently imposes rent control. Some cities (Philadelphia among them) have other tenant-protection rules, but none caps the rent you may charge.

7. Security Deposit Rules

Pennsylvania's Landlord and Tenant Act of 1951 sets the deposit rules:

• Limit: 2 months’ rent in year one, 1 month after — once the second year begins you must return any amount over one month’s rent (68 P.S. §250.511a). After five years, the deposit can’t be increased even if rent rises.
• Interest after two years — deposits over $100 held into the third year must go in an interest-bearing escrow account; the landlord keeps a 1%/year fee and pays the rest of the interest to the tenant annually (68 P.S. §250.511b).
• Return within 30 days — return the deposit or provide a written itemized list of damages; failure to provide the list within 30 days forfeits the right to withhold any of it, and wrongful withholding can mean double damages (68 P.S. §250.512).

8. How SheltrIQ Helps Pennsylvania Landlords

Pennsylvania's rules diverge from the federal return more than most states — SheltrIQ keeps both straight:

• Bonus-depreciation tracking — flags the PA disallowance so your PA depreciation uses a regular method while your federal return keeps the bonus.
• AI Schedule E classification — builds an accurate federal Schedule E, the starting point you adjust for PA’s rental income class.
• Per-property netting — tracks each property’s income and loss, matching how PA nets results within the rents/royalties class.
• Deadline reminders — keeps the $7 September 30 annual report and estimated-payment dates on your radar.