Updated October 7, 2026. Quick answer: No, not once you are retired. The Pennsylvania PA-40 instructions exempt eligible employer plan payments, listing “Payments you receive after you qualify for retirement and retire.” Nonresidents are taxed only on income from Pennsylvania sources.
How Pennsylvania treats a pension earned elsewhere
| Item | What the state documents say |
|---|---|
| Nonresidents | Pennsylvania taxes a nonresident only on income earned, received, or realized from Pennsylvania sources, and its nonresident instructions describe wages for work done in the state. Payments from deferred compensation plans and early retirement incentive plans can be taxable in part if earned while working in Pennsylvania. The nonresident instructions say nothing about taxing ordinary retirement distributions of a person who lives elsewhere. |
| Residents with a pension earned elsewhere | A Pennsylvania resident reports all income regardless of where it was earned. Payments from an eligible employer-sponsored retirement plan are not taxable if received after the person qualifies for retirement and retires. Distributions taken before meeting the plan’s retirement age or service requirements, and from plans that are not eligible, can be taxable. |
| Part-year residents (year of a move) | A part-year resident reports all income from all sources for the time lived in Pennsylvania, plus Pennsylvania-source income for the time not a resident. Retirement payments received after retiring from an eligible plan stay exempt under the same rule. The source says: “PA law taxes part-year residents on all income from all sources”. The rule comes from the part-year resident section of the PA-40 instructions. |
| Rate | Pennsylvania prints a flat income tax rate of 3.07 percent for 2025. The source says: “The state income tax rate for 2025 is 3.07 percent (0.0307).” |
| Return to file | Residents, nonresidents, and part-year residents all file the PA-40, marking the resident, nonresident, or part-year oval on the return. The source says: “residents use the same PA-40 form as PA residents.” The department publishes no separate nonresident return for individuals. |
A $40,000 move-year example
A retiree receives $40,000 of pension in the year of a move: $20,000 before the move date, as a Pennsylvania resident, and $20,000 after leaving.
The first $20,000 can be taxed by Pennsylvania; the rest is outside its reach under the federal rule below. At the 3.07% rate printed for 2025, the tax on it is computed as $20,000 x 0.0307 = $614, before any exclusion or credit. Federal tax still applies.
The federal rule that protects a nonresident
4 U.S.C. 114(a) bars a state income tax on retirement income of an individual “who is not a resident or domiciliary of such State”. Retirement income means certain plan payments made as a “series of substantially equal periodic payments”, so not every payment is covered.
Related: how Pennsylvania taxes retirement income, whether Pennsylvania taxes pensions, Pennsylvania to Arizona retirement taxes, Pennsylvania to Delaware retirement taxes, out-of-state pension tax by state, and deferred compensation lump sums after a move.
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Answer againSources
- 2025 Pennsylvania Personal Income Tax Return Instructions Booklet, PA-40 (Pennsylvania Department of Revenue): https://www.pa.gov/content/dam/copapwp-pagov/en/revenue/documents/formsandpublications/formsforindividuals/pit/documents/2025/2025_pa-40in.pdf
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Government Publishing Office, 2023 edition): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.