Lana Oconnell
Whether or not a full-time student pays state tax in Pennsylvania depends on several factors, including their residency status, the source of their income, and whether they receive any scholarships, stipends, or fellowships. In general, Pennsylvania requires all residents, part-year residents, and non-residents to file a state tax return if they have earned an income of $1 or more, even if no tax is due.
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What You'll Learn
Graduate stipends and fellowships
Graduate students at Penn State can access funding from various sources, including the Graduate School, academic departments, student financial aid, and external agencies. The Office of Graduate Fellowships and Awards Administration assists continuing graduate students in locating and applying for fellowships from external agencies. Graduate research assistantships are also available for qualified students, which include stipends, tuition remission, and medical insurance subsidies. At the Hershey campus, most assistantships are half-time and require registration for 9-12 credits. Doctoral students at the College of Medicine who receive externally funded fellowships are eligible for a College of Medicine Fellowship Incentive worth 5% of the fellowship stipend.
The National Academies of Science and Engineering Fellowship Opportunities (NASEM) offer several fellowships in science, engineering, and medicine. NASEM also administers predoctoral, postdoctoral, and senior fellowship awards on behalf of government and private/foundation sponsors. The Pathways to Science Database includes graduate fellowship opportunities in STEM fields. Additionally, the NIH Fogarty International Center provides funding opportunities for global health research.
The University of Pennsylvania's Graduate Student Center provides resources and support for students seeking grants and fellowships. The Center for Undergraduate Research and Fellowships (CURF) assists graduate students in securing funding for language study, graduate coursework, or research through fellowships in its directory. The Graduate Funding and Finances section of the resource guide offers information on graduate funding and need-based aid. Various workshops and information sessions related to fellowships and grants are also available for students.
The Physician Associate Foundation (PAF) offers scholarships to PA students based on academic achievement, financial need, leadership, and service activity involvement. The PAF scholarship selection committee seeks applicants who demonstrate a passion for the PA profession and a commitment to serving their communities and patients. Additional consideration is given to applicants from underrepresented groups.
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Non-resident tax status
In Pennsylvania, an individual is considered a non-resident for tax purposes if they are a domiciliary of another state or country, unless they qualify as a statutory resident. A Pennsylvania domiciliary can be considered a non-resident if they meet the following criteria: they do not maintain a permanent place of abode in Pennsylvania at any time during the tax year; they maintain a permanent place of abode elsewhere; and they spend no more than 30 days of the tax year in Pennsylvania. College dormitories, fraternity houses, sorority houses, and off-campus rentals by students enrolled in college or universities do not qualify as permanent places of abode.
Non-residents of Pennsylvania are taxed on the income they earn, receive, and realize from PA sources. Non-residents must pay PA income tax on compensation for services performed in Pennsylvania. Non-residents must also pay PA income tax on gains from the sale, exchange, or disposition of real property in Pennsylvania. Nonresidents do not pay PA income tax on ordinary interest, such as interest from personal savings and checking accounts, and dividends. Nonresidents must report winnings from gambling and lotteries in Pennsylvania, but not prizes awarded by the PA Lottery.
Every resident, part-year resident, or non-resident individual must file a Pennsylvania Income Tax Return (PA-40) when they realize income generating $1 or more in tax, even if no tax is due.
If an individual is in Pennsylvania only to attend school, they are considered a resident of their permanent address for tax purposes. They will file a non-resident Pennsylvania return to report their Pennsylvania income and a resident return for their home state to report all income, including the income from Pennsylvania. The resident tax return will provide a credit for the tax paid to the non-resident Pennsylvania tax return.
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Local services tax (LST)
In the state of Pennsylvania, an individual is considered a nonresident for tax purposes if they are a domiciliary of another state or country. College dormitories, fraternity houses, sorority houses, and off-campus rentals by students enrolled in colleges or universities do not qualify as a permanent place of abode. However, if an individual is only in Pennsylvania to attend school but maintains their permanent address in another state, they are considered a resident of that state for tax purposes. For example, a college student with a permanent address in New York but earning an income in Pennsylvania is required to pay Pennsylvania state tax. However, they will also need to file a New York resident tax return and report all income, including the income earned in Pennsylvania. New York will provide a credit or allowance for the tax already paid to Pennsylvania.
The Local Services Tax (LST) in Pennsylvania was previously known as the Emergency and Municipal Services Tax. The LST is imposed by municipalities, and the revenue is used to fund local services. At least 25% of the tax revenues must be allocated for emergency services. The LST rate varies across municipalities, and it is applicable to both residents and non-residents earning an income within the municipality. The tax rate can be obtained from the Pennsylvania Department of Community and Economic Development (DCED).
Individuals with a total earned income of less than $12,000 are exempt from the LST. Additionally, members of the reserve components of the armed forces and honorably discharged veterans with service-connected disabilities are exempt from the LST. Employers are required to withhold the LST from their employees' wages and remit it to the respective taxing authorities. If an employee provides an exemption certificate, the employer must stop withholding the LST. However, if the exempt employee's income exceeds $12,000, the employer must "restart" withholding the LST by collecting a lump sum tax equal to the amount that was not withheld due to the exemption.
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Earned Income Tax (EIT)
In Pennsylvania, employers are required by law to withhold earned income tax from all employees' pay. The local Earned Income Tax (EIT) was enacted in 1965 under Act 511, which gives municipalities and school districts the authority to levy a tax on individuals' gross earned income, salaries, wages, commissions, bonuses, incentive payments, fees, tips, and other compensation for services rendered. The EIT is separate from the Pennsylvania personal income tax.
The EIT rate owed is determined by comparing the "Total Resident EIT Rate" of the municipality in which the employee lives to the "Work Location Non-Resident EIT Rate" of the municipality in which the employee works. The higher of the two rates is the applicable rate owed and withheld.
If your employer did not withhold the tax, you were self-employed, or you withdrew money from a deferred compensation plan, you are responsible for filling out the appropriate EIT forms and making the necessary payments.
In the case of a student with a permanent address in New York, where their parents live, but who lives and earns money in Pennsylvania, they are considered a New York resident for tax purposes. They must file a non-resident Pennsylvania return to report their Pennsylvania income and a New York resident return to report all income, including the income earned in Pennsylvania. New York will provide a credit or allowance for the tax already paid to Pennsylvania, so the student will not be taxed twice on the same income.
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Tax exemptions
In Pennsylvania, college dormitories, fraternity houses, sorority houses, and off-campus rentals by students enrolled in college or university do not qualify as a permanent place of abode. An individual is a non-resident for Pennsylvania personal income tax purposes if they are a domiciliary of another state or country.
If you are a non-resident of Pennsylvania and earned money in the state, you are required to file a non-resident Pennsylvania tax return to report the Pennsylvania income. You will also need to file a resident return in your home state to report all income, including the income from Pennsylvania. Your home state will provide a credit or allowance for the tax already paid to Pennsylvania, so you will not be taxed twice on the same income.
If you are a Pennsylvania resident taxpayer who has non-Pennsylvania-sourced income subject to both Pennsylvania personal income tax ("PA PIT") and the income or wage tax of another state, you can claim a credit for the tax paid to the other state as a credit against your Pennsylvania personal income tax, subject to certain limitations. To do this, you must complete PA-40 Schedule G-L and submit it with the PA-40 Personal Income Tax Return, along with a copy of the income tax return and W-2(s) filed with the other state.
Additionally, students who are enrolled at least half-time in graduate assistant activities and receiving a payroll payment are exempt from OASDI and Medicare taxes.
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Frequently asked questions
It depends. If you are a full-time student in PA with a permanent address in another state, you are considered a non-resident of PA and will have to file a non-resident Pennsylvania tax return. However, you may still be liable to pay state taxes in your permanent state of residence.
Yes. The Pennsylvania State University is required to withhold federal taxes from each pay received.
Yes, graduate students in PA are exempt from state income tax if their stipend is a standard part of their degree requirements for all students in their program.
Yes, scholarships, stipends, grants, and fellowships are taxable as compensation if services are rendered in connection with them.
Your Local EIT rate is determined by comparing your "Total Resident EIT Rate" (where you live) to the "Work Location Non-Resident EIT Rate" (where you work). The rate owed is always the higher of the two.
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