Updated October 24, 2026. Quick answer: Line 2 of the Pennsylvania Form PA-40 is where you report your interest income for the year. It is for anyone with bank, investment or annuity interest, and the booklet says to complete PA Schedule A if required. The amount is added into the line 9 total of Pennsylvania taxable income.
What this line does
Line 2 on the form reads “Interest Income. Complete PA Schedule A if required.”. The booklet’s instruction heading is “LINE 2. INTEREST INCOME”, and its schedule heading is “PA SCHEDULE A (LINE 2)”. The line sits on the first page of the PA-40 (marked Side 1).
This page covers line 2. The next income line is covered on Pennsylvania Form PA-40 line 3, and the full run of lines is on Pennsylvania Form PA-40 line by line.
Who it applies to
The booklet speaks to anyone with interest to report. “Report all PA-taxable interest income received or credited during the year.” On what counts, it says “PA taxable interest income includes but is not limited to interest income from personal savings and checking accounts, insurance contracts, obligations of other states (not Pennsylvania), and investments.”
The booklet marks one group as exempt: “Interest income from direct obligations of the U.S. government, the Commonwealth of Pennsylvania, and political subdivisions of Pennsylvania is tax exempt.” The federal side of savings bond and Treasury interest is covered on 1099-INT box 3, and the interest box that most statements start from is on 1099-INT box 1.
What the instructions say
The booklet’s text for line 2 is on pages 14 and 15, and the Schedule A instructions begin on page 31. Each sentence is printed below as the booklet gives it.
| Line | What the form says |
|---|---|
| Form label | “Interest Income. Complete PA Schedule A if required.” |
| Line 2 | “Report all PA-taxable interest income received or credited during the year.” |
| Statements | “Generally, Forms 1099-INT and similar statements from financial institutions show the interest amount.” “You do not have to submit these forms and statements.” |
| What it includes | “PA taxable interest income includes but is not limited to interest income from personal savings and checking accounts, insurance contracts, obligations of other states (not Pennsylvania), and investments.” |
| Schedule A pointer | “See the instructions beginning on Page 31 for when to complete and submit PA Schedule A.” |
| Exempt interest | “Interest income from direct obligations of the U.S. government, the Commonwealth of Pennsylvania, and political subdivisions of Pennsylvania is tax exempt.” |
| Classifying interest | “You must classify interest, regardless of how you report the income for federal purposes.” “Report personal interest on Line 2.” |
| Business interest | “From business accounts, working capital interest, and accounts receivable in determining profit (loss) on a PA business schedule” |
| Rental deposits | “From rental security deposits in determining income (loss) on PA Schedule E.” |
| Money market and mutual funds | “Include the earnings distributed to you (other than withdrawals of your previously PA-taxed contributions) as dividend income on Line 3.” |
| Annuities | “If you are required to report an amount from an annuity for federal income tax purposes, you are required to report the amount as interest income for PA PIT purposes.” |
| Annuities, schedule line | “Report any annuity, life insurance or endowment contract amounts reported for federal income tax purposes as interest income on Line 11 of PA Schedule A.” |
| Charitable gift annuities | “If you established a gift annuity to a charitable organization from which you are receiving periodic payments, you have PA-taxable income.” |
| Gross income class | “PA-taxable interest income (Line 2), dividend income (Line 3), and gambling and lottery winnings (Line 8) are gross taxable income classes.” “You may not deduct any expenses in computing these classes of income.” |
| When Schedule A is not submitted | “you must report your income on Line 2 of the PA-40, but you do not have to submit PA Schedule A.” |
| Schedule A, taxable sources | “Credit unions, even if reported as dividends on your statement”; “Bank deposits”; “Certificates of deposit”; “Interest-bearing personal checking accounts”; “Obligations of other states or countries”. |
| Schedule A, exempt sources | “Direct obligations of the U.S. government (U.S. Treasury Bonds, Notes, Bills, Certificates, and Savings Bonds)” |
| Schedule A, exempt list | “For a list of exempt obligations, request Tax Exempt Obligations for Pennsylvania Personal Income Tax Purposes (Form REV-1643).” |
| Schedule A, line 1 | “Enter the amount of interest income you reported on Line 2b of your federal Form 1040.” |
Where the result goes next
The line 2 amount is added on line 9. The form’s line 9 label reads “Total PA Taxable Income. Add only the positive income amounts from Lines 1c, 2, 3, 4, 5, 6, 7, and 8.” For the federal interest lines, see Form 1040 lines 2a and 2b, and for the federal schedule, see Schedule B lines 1 to 4. The state view of interest and dividends together is on does Pennsylvania tax dividends and interest.
Edition and line numbers
This page reads 2025 PA Personal Income Tax Return Instructions (PA-40 IN), Pennsylvania Department of Revenue, and 2025 Form PA-40, Pennsylvania Income Tax Return, Pennsylvania Department of Revenue, for tax year 2025, the current files the Pennsylvania Department of Revenue served on 2026-10-24. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Reporting interest as the federal form classifies it. The booklet says “You must classify interest, regardless of how you report the income for federal purposes.”
- Taking expenses against interest. The booklet says “You may not deduct any expenses in computing these classes of income.”
- Skipping line 2 because no schedule is needed. The booklet says “you must report your income on Line 2 of the PA-40, but you do not have to submit PA Schedule A.”
Related: 1099-INT box 3, 1099-INT box 1, Form 1040 lines 2a and 2b, Schedule B lines 1 to 4, and does Pennsylvania tax dividends and interest.
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Answer againSources
- 2025 PA Personal Income Tax Return Instructions (PA-40 IN), Pennsylvania Department of Revenue: www.pa.gov
- 2025 Form PA-40, Pennsylvania Income Tax Return, Pennsylvania Department of Revenue: www.pa.gov
- Related official page (not quoted): Pennsylvania Department of Revenue, personal income tax forms and publications: www.pa.gov
Read from the state revenue documents linked above on October 24, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.