Key figures
Pennsylvania accounting
2026, with sources
A falling rate, a capped NOL
Pennsylvania taxes corporations through the Corporate Net Income Tax (CNIT), reported on Form RCT-101. The rate is 7.49% for tax years beginning in 2026, part of a schedule that drops half a point a year until it reaches 4.99% in 2031. The CNIT starts from federal taxable income on a separate-company basis: each corporation files its own report with a pro forma federal return, and there is no combined or consolidated filing.
Losses are where Pennsylvania differs most. The net loss deduction is capped as a percentage of taxable income: 40% for losses from tax years before 2025, and for losses from 2025 onward 50% in 2026, 60% in 2027, 70% in 2028 and 80% from 2029. A company with a large Pennsylvania loss carryforward still pays tax on part of its income in its first profitable years.
Market sourcing and the $500,000 presumption
Income is apportioned on a single sales factor. Receipts from services are sourced to Pennsylvania when the service is delivered to a location in Pennsylvania, which the Department of Revenue reads as the customer’s location, so a SaaS company’s Pennsylvania factor follows its Pennsylvania customers.
The Department presumes a corporation without physical presence has a filing requirement once it has $500,000 or more of Pennsylvania-sourced gross receipts. A company below that with no office or employees in the state usually has no CNIT filing; one employee working from home in Pennsylvania changes that.
Where the provision differs from federal
Pennsylvania adds back federal bonus depreciation under §168(k) and recovers it through its own depreciation adjustment on Schedule C-8. Act 45 of 2025 added three more decouplings for tax years beginning after 2024: research and experimental expenditures (added back, then deducted at 20% a year), the new 100% deduction for qualified production property under §168(n), and the §163(j) interest limit, which Pennsylvania applies as it stood on December 31, 2024.
An example: a startup with $1 million of domestic research costs expensed federally in 2026 adds the $1 million back on its Pennsylvania return and deducts $200,000 a year for five years. Its Pennsylvania taxable income is higher than its federal income in the early years, which is a deferred tax asset in the state provision, and the capped NOL deduction makes the current Pennsylvania tax line appear sooner than founders expect.
The federal baseline
This page covers what Pennsylvania adds. The federal rules underneath it apply here too.
Common questions
Can we use our NOLs to wipe out Pennsylvania tax?
Not all at once. Pennsylvania caps the NOL deduction as a share of taxable income: 40% for losses from tax years before 2025, and for later losses 50% in 2026, rising ten points a year to 80% from 2029. A startup that turns profitable after years of losses will pay Pennsylvania tax in its first profitable year even with a large carryforward.
Does Pennsylvania follow federal R&D expensing?
No. Under Act 45 of 2025, Pennsylvania adds back the federal deduction for research and experimental expenditures, including immediate expensing under §174A, and lets the company deduct the same costs at 20% a year. Amounts from 2022–2024 that hadn’t been amortized federally are also spread over five years from 2025.
Accounting next door
- DEDelaware accountingDelaware’s corporate income tax is 8.7% of apportioned federal taxable income, with separate-company returns and a single gross receipts factor. A Delaware corporation whose only Delaware activity is its registered office doesn’t file it, but still owes the franchise tax.
- MDMaryland accountingMaryland taxes corporations at a flat 8.25% on separate-company returns, with a single receipts factor and services sourced to the customer. For 2025 it decoupled from federal R&D expensing.
- NJNew Jersey accountingNew Jersey’s Corporation Business Tax is 9% on income over $100,000, plus a 2.5% Corporate Transit Fee above $10 million, with mandatory combined reporting and market-based sourcing. Every filer pays a minimum tax of at least $500, and NOL deductions are capped at $1 million a year through mid-2030.
- NYNew York accountingNew York taxes a C-corp three ways: the state franchise tax, an MTA surcharge in the commuter district, and in the five boroughs a separate NYC Business Corporation Tax. All three apportion by where customers are.
- OHOhio accountingOhio has no corporate income tax; its 0.26% Commercial Activity Tax excludes the first $6 million of Ohio receipts, so the business tax a startup actually meets is its city’s net profit tax.
- WVWest Virginia accountingWest Virginia taxes corporations at 6.5% with mandatory combined reporting, a single sales factor and market-based sourcing since 2022, and conforms to federal tax changes enacted through 2025.
Founder guides on this
- US GAAPUS GAAP for early-stage startups, in plain EnglishAccrual accounting, revenue recognition (ASC 606), leases (ASC 842), stock compensation and capitalized software: what each means for a small company.
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- FundraisingAudit-ready books before your Series AInvestors, lenders and auditors ask for the same things: accrual statements, reconciled accounts and support for every balance. How to be ready first.
More of the Pennsylvania guide
- ReceivablesReceivables and sales tax in PennsylvaniaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in PennsylvaniaPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in PennsylvaniaWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in PennsylvaniaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in PennsylvaniaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.