The Pennsylvania Guide to State Tax Incentives

Pennsylvania is a powerful state for business owners. Running an operation in the Keystone state gives you access to a diverse, highly educated workforce and some of the largest US markets. The state also has a handful of helpful business tax credits and incentives geared toward business owners who are boosting the economy or engaging in specific industries. See our list below for the details.

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Pennsylvania business tax incentives and credits

Investment and development tax credits

Research and Development Tax Credit Program

Businesses conducting qualified research in Pennsylvania can take advantage of the state’s Research and Development Tax Credit Program. To qualify for the program, businesses need to meet the following criteria:

Pay either corporate net income tax or personal income tax
Have had at least two years of R&D expenditures
Incur research expenses for qualified R&D activities, meaning those activities must be technological in nature; used to improve the functionality, performance, reliability, or quality of a new or existing business component; used to gather information that will help eliminate uncertainty around the development of a product; and involve a process of experimentation, such as testing or modeling

Learn more about the program here.

Historic Preservation Tax Credit

The Historic Preservation Tax Credit (HPTC) gives tax credits to businesses that turn outdated or unused designated historic structures into income-producing properties. The credit is equal to up to 25% of a business’s qualified rehabilitation expenditures, and 30% if the expenditures are connected to a workforce housing project.

The maximum tax credit a business can receive in one year is $500,000. To qualify for the program, businesses need to get their rehabilitation project approved by the Pennsylvania Historical and Museum Commission. Apply for the credit here.

Keystone Innovation Zone Tax Credit

The Keystone Innovation Zone (KIZ) Tax Credit is an incentive program that caters to companies in targeted industries located within one of Pennsylvania’s Keystone Innovation Zones. The tax credit is equal to 50% of the increase in a company’s gross revenues attributable to activities in a KIZ. The maximum credit is $100,000 per year per company.

To qualify for the incentive, companies must be less than eight years old, belong to a targeted industry, and be located in a KIZ. Apply for the program here.

Keystone Special Development Zone Tax Credit Program

The Keystone Special Development Zone (KSDZ) Tax Credit Program gives eligible businesses tax credits for creating new jobs and revitalizing abandoned commercial and industrial sites within KSDZs. The credit is $2,100 per job created.

Apply for the program here.

Donation tax credits

Educational Improvement Tax Credit

Pennsylvania offers the Educational Improvement Tax Credit (EITC) to eligible businesses that contribute to scholarship organizations, educational improvement organizations, and pre-kindergarten scholarship organizations within the state. The credit amount is equal to 75% of a business’s cash contribution, up to $750,000 per year.

For Pre-K scholarship organizations, the credit amount is equal to 100% of the first $10,000 contributed and up to 90% of the remaining amount contributed, up to a maximum of $200,000.

Learn more about the credit here.

Opportunity Scholarship Tax Credit

Businesses in Pennsylvania can take the Opportunity Scholarship Tax Credit (OSTC) if they contribute to IRC 501C Opportunity Scholarship Organizations. These organizations give scholarships to students living in areas of Pennsylvania with low-achieving elementary and secondary schools.

The credit amount is equal to 75% of a business’s contribution, up to $750,000 per year. The credit bumps up to 90% of the business’s contribution if the business commits to giving to the scholarship organization two years in a row.

Learn how to apply here.

Neighborhood Assistance Program, Enterprise Zone Tax Credit

Pennsylvania’s Neighborhood Assistance Program gives tax credits to businesses that invest in rehabilitation or expansion projects in designated enterprise zones. The credit amount is up to 25% of a business’s investment, up to $500,000 per project. Learn more about the program here.

Industry-specific tax credits

Malt Beverage Tax Credit Program

Businesses in Pennsylvania that manufacture malt or brewed beverages can apply for the Malt Beverage Tax Credit Program, which gives them credits against the state’s malt beverage tax. The amount of credit is based on how much a business invests in qualifying capital expenditures for their manufacturing process, like new equipment or machinery.

The maximum credit amount is $200,000 per business per year. Applications are due April 1, 2025, so get yours in quickly if you qualify. Find more information here.

For a full list of business taxes imposed in Pennsylvania, check out the Employer’s Guide to Business Taxes in the Keystone State.

Resource Enhancement and Protection Program

The Resource Enhancement and Protection Program (REAP) gives tax credits to farmers, businesses, and landowners who implement conservation practices and systems. That includes any best practices that improve water quality, reduce nitrogen, phosphorus, and sediment pollution, and streamline manure management.

The tax credit amounts vary. Eligible businesses and farms can get credits equal to 50-90% of their project costs, depending on the type of project:

50% credit for no-till planting equipment; precision nutrient application equipment; manure storage structures; cover crops; grazing practices; and forested riparian buffers
75% credit for projects that reduce pollution runoff from animal concentration areas, nutrient/manure management plans, and conservation/Ag E&S plans
90% credit for multi-species cover crops, forested riparian buffers, and livestock exclusion from streams and associated practices

The deadline for 2024-2025 has already passed, but check the program webpage here for application dates for the following year.

Film Tax Credit

The Pennsylvania Film Office offers a tax credit to film productions that spend at least 60% of their total budget in the state. That includes feature films, television films, television talk shows, game shows, television commercials, and television pilots.

The credit is equal to 25% of a company’s qualified production expenses, including but not limited to operations, lighting, visual effects, food, lodging, and equipment rentals. Get all the information you need on the credit here.

Entertainment Economic Enhancement Program

The Entertainment Economic Enhancement Program gives tax credits to eligible concert tour promotion companies and concert tour management companies that produce a series of live concerts in the state. The credit is equal to up to 35% of eligible expenses, up to $1.5 million per company per year.

Get more information on the program here.

Pennsylvania Resource Manufacturing Tax Credit

The Pennsylvania Resource Manufacturing Tax Credit is available to manufacturers that purchase natural gas containing ethane as a petrochemical feedstock at a facility in the state. The credit is equal to five cents per gallon of ethane purchased and used to manufacture ethylene.

To qualify, manufacturers have to make a capital investment of at least $1 billion and create the equivalent of at least 2,500 full-time jobs while constructing the facility. Learn more here.

Coal Refuse Energy and Reclamation Tax Credit

The Coal Refuse Energy and Reclamation Tax Credit is available to facilities that generate electricity using coal refuse, control acid gases for emission control, and use their own produced ash to reclaim mining-affected sites.

The credit amount is equal to $4 multiplied by the tons of qualified coal refuse used to generate electricity in the previous year. Apply for the credit here.

Pennsylvania Economic Development for a Growing Economy Tax Credits

The Pennsylvania Economic Development for a Growing Economy (PA EDGE) Tax Credits are a series of four industry-specific tax credits available to businesses that create jobs and stimulate the economy. Here are the credits:

Local Resource Manufacturing Tax Credit Program: Companies that purchase dry natural gas to manufacture petrochemicals or fertilizers at a facility in the state can get a credit equal to 47 cents per unit of dry natural gas.
Milk Processing Tax Credit: Companies that purchase milk to use in dairy processing at a facility in the state can take a credit equal to five cents per gallon of milk.
Regional Clean Hydrogen Hubs Tax Credit: Companies that purchase clean hydrogen and natural gas to use in manufacturing at a facility in the state can take a credit equal to 81 cents per kilogram of clean hydrogen and 47 cents per unit of natural gas.
Semiconductor Manufacturing and Biomedical Manufacturing and Research Tax Credit Program: Companies that conduct semiconductor manufacturing, biomedical manufacturing, or biomedical research can apply for a credit equal to 2.5% of the initial capital investment or $20,000 per job, whichever is less.

Find out more about the PA EDGE program here.

Get tailored tips on starting and growing a business in Pennsylvania.

Pennsylvania city and county tax credits

Many cities in Pennsylvania have their own business tax incentive programs. Philadelphia, for example, offers tax credits for hiring previously incarcerated individuals, growing living gardens on your business’s roof, and revitalizing the economy in distressed areas of the city.

Search the “business” or “economic development” page of your city’s website to check out your local programs.

Business financing in Pennsylvania

Growing a business in the Keystone State (where competition is high) can be challenging, but state resources can help. Fortunately, Pennsylvania has no shortage of funding programs for businesses of all sizes and in all industries.

For a complete list of current options, read through Gusto’s super comprehensive guide to business grants and loans in Pennsylvania.