State guide · Pennsylvania · 2026 rules

S corporation in Pennsylvania: what the election changes

Pennsylvania adds almost nothing at the state level. Local taxes move the numbers most, in Philadelphia and wherever a local earned income tax applies.

Updated October 24, 202611 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

State where the business is Each state treats the election differently. The check shows only the questions that matter there.

Net profit for the year, before paying yourself Your business's profit after expenses. Money you take out for yourself does not lower it.

Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

Salary you would pay yourself as an S corporation What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.

Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)

Your job Pick the job closest to what you do most of the week.

Area Pick your metro area if it is listed. Pay varies by area.

Another job I also earn W-2 wages from a job outside this business

Typical values: change them if you know yours

Payroll service, per year typical value Published one-person prices: $492 to $684 a year (October 2026).

Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

Extra tax-prep cost for the S-corp return typical value A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).

Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Your top federal income tax rate Not sure? Keep 22%. It changes line 5 only.

Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Filing status Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).

Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The state: no entity tax

Pennsylvania does not tax a Pennsylvania S corporation’s income at the entity level and has no pass-through entity tax. The Department of State annual report fee is $7 for an LLC and a corporation alike.

Unemployment compensation: 3.822% for a new non-construction employer on the first $10,000 of wages in 2026, plus 0.07% withheld from all of the worker’s wages. Corporate officers are covered.

Philadelphia

Today the owner pays the Net Profits Tax: 3.735% for residents and 3.425% for non-residents in tax year 2026, less a credit of up to 60% of the net income part of the Business Income & Receipts Tax (BIRT).

Corporations are exempt from the Net Profits Tax. After the election the S corporation withholds the Wage Tax from your salary (3.735% resident, 3.425% non-resident from July 1, 2026), and a resident owner pays the School Income Tax of 3.735% on the S-corporation income.

BIRT applies at the same rates before and after: 1.395 mills on gross receipts and 5.65% of taxable net income for 2026. Its $100,000 gross-receipts exemption ended with tax year 2025. Whether your salary lowers BIRT net income is not confirmed in city text, so the calculator treats BIRT as unchanged.

For a resident owner, the School Income Tax on profit after salary can make the election cost more, as the examples show.

Elsewhere in Pennsylvania

Outside Philadelphia, the local earned income tax reaches a sole proprietor’s net profits. After the election it reaches only your salary: the law’s definition of net profits excludes corporations, and S-corporation income is not compensation. Enter your local rate in the calculator.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salary	No local tax	Philadelphia resident	1% local earned income tax
$80,000 / $45,000	$588 lower	$1,930 higher	$938 lower
$120,000 / $60,000	$2,979 lower	$852 higher	$3,579 lower
$200,000 / $90,000	$7,739 lower	$1,281 lower	$8,839 lower

Starting payroll in Pennsylvania

Register through myPATH (PA Online Business Tax Registration); the same registration sets up the unemployment compensation account.

Pennsylvania follows the federal S election; Form REV-976 exists only to opt out.

New hire paperwork for Pennsylvania

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status