Pennsylvania State Tax Credits

More ways to save your hard-earned money from the tax man!

Pennsylvania has some great State Tax Credit for you.

Thank you so much for checking our resource out here for your state and congratulations for taking a proactive step to paying less in taxes. For your state, we have identified the tax credits that are currently being offered to help you pay less in state taxes.

We hope this resource is helpful to you, and if there is something you feel we have missed, please let us know!

It would be completely arrogant of us to think that we know all things and if we missed something we want to know so we can vet that and help you and our other friends in the entrepreneurial community pay less in taxes! And if you found this helpful, you should check out our DIY resources inside of our Tax Savings Communities (found at www.MakeTaxesFair.com/Our-Communities).

We're also ready to help you if you want to skip the line of the DIY process and get help directly from us. To learn more about how we help our clients check out www.MakeTaxesFair.com/Get-My-Roadmap
Pennsylvania

Pennsylvania Educational Improvement Tax Credit (EITC)

Overview:
The EITC program provides tax credits to eligible Pennsylvania businesses that contribute to approved scholarship or educational organizations, helping fund private education and innovative public school programs.

Who It’s For:
Pennsylvania businesses subject to taxes such as Personal Income Tax, Corporate Net Income Tax, Insurance Premiums Tax, or other specified state taxes.

Four Key Highlights:

  1. Up to 90% Tax Credit Available

    • 75% of the contribution is creditable in a single year.

    • Commit for two years to increase the credit to 90%.

    • Annual cap: $750,000 in total contributions.

  2. Flexible Contribution Options

    • Contribute to approved Scholarship Organizations (SO), Educational Improvement Organizations (EIO), or Pre-Kindergarten Scholarship Organizations (PKSO).

    • Acceptable donations: Cash, property, or services (not part of standard business operations).

  3. Strict Compliance Timelines

    • Contribution must be made within 60 days of approval.

    • Proof of contribution must be submitted within 90 days.

    • Failure to comply results in revocation of the credit.

  4. Pass-Through Entity Credit Transfer

    • LLCs, S-corps, and partnerships can pass credits to individual partners/owners using Form REV-1123.

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Pennsylvania Keystone Innovation Zone (KIZ) Tax Credit Program

Overview:
The KIZ Tax Credit Program offers up to $100,000 in annual credits to for-profit startups under 8 years old located in designated Keystone Innovation Zones. It supports business growth by offsetting state income taxes or allowing the sale of unused credits.

Who It’s For:
For-profit businesses under 8 years old, operating within targeted industry sectors and located inside Pennsylvania-designated KIZ boundaries.

Four Key Highlights:

  1. Up to $100,000 Annual Tax Credit

    • Credit equals 50% of gross revenue growth from KIZ-related activities over the past two years.

    • Annual statewide funding cap: $15 million.

  2. Flexible Credit Use & Transferability

    • Apply the credit to state Personal Income Tax or Corporate Net Income Tax liability.

    • Unused credits can be carried forward up to 5 years or sold to other taxpayers.

  3. Targeted to Young, Innovative Companies

    • Business must be under 8 years old.

    • Must operate in one of the state’s designated high-growth sectors.

  4. Time-Sensitive Application Process

    • Applications due online via the eGrants System by December 1 each year.

    • Credits awarded the following May 1.

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Pennsylvania Neighborhood Assistance Program – Enterprise Zone Tax Credit (NAP/EZP)

Overview:
The NAP/EZP tax credit offers up to 25% of qualified investments to businesses that rehabilitate, expand, or improve real estate in designated enterprise zones, driving job creation and revitalization in economically distressed areas.

Who It’s For:
Private companies investing in physical improvements to buildings or land within Pennsylvania-designated enterprise zones.

Four Key Highlights:

  1. 25% Tax Credit on Eligible Investments

    • Businesses receive a credit equal to 25% of the amount invested in real property improvements, up to $500,000 per project.

  2. Job Creation Incentive

    • Eligible projects must demonstrate a clear connection to job creation or retention in the enterprise zone.

  3. Flexible Credit Use

    • Unused credits can be carried forward for 5 years or sold/transferred to other taxpayers.

  4. Online Application Required

    • Applications must be submitted via DCED’s online system, following NAP EZP guidelines and checklist requirements.

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Pennsylvania Research & Development (R&D) Tax Credit

Overview:
This program provides tax credits to Pennsylvania businesses and individuals for increasing in-state R&D spending, with enhanced benefits for small businesses and opportunities to sell or transfer unused credits.

Who It’s For:
Entities subject to Pennsylvania Corporate Net Income or Personal Income Tax that conduct qualified R&D within the state and meet compliance requirements.

Four Key Highlights:

  1. Credit Value of 10%–20% on Increased R&D Spending

    • Most businesses earn 10% on their increased qualified R&D expenses; small businesses (gross receipts ≤ $5M) get 20%.

  2. Large Annual Allocation with Small Business Carveout

    • $55 million in total credits available annually, with $11 million set aside for small businesses.

  3. Carryforward & Transferable Options

    • Unused credits may be carried forward up to 15 years and can be sold or transferred (note: these transactions are taxable).

  4. Strict Compliance & Filing Deadlines

    • Must apply via myPATH between August 1 and December 1 and stay fully compliant with all PA tax laws to qualify or transfer credits.

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