Updated October 24, 2026. Quick answer: Line 1a of the Pennsylvania Form PA-40 is where you enter your gross compensation for the year, the first of the income lines on the return. It is meant for anyone with wages, tips, fees or other pay for services, and the booklet points to Box 16 of the W-2 as the usual starting place. The amount flows to line 1c after any line 1b expenses, and from there into the line 9 total.
What this line does
The form’s line 1a reads “Gross Compensation. Do not include exempt income, such as combat zone pay and qualifying retirement benefits. See the instructions.”. The booklet’s instruction heading is “LINE 1a. GROSS COMPENSATION”. On the form, line 1a is the first of the income lines, printed on the first page of the PA-40 (marked Side 1).
This page covers line 1a. For the lines that follow it, see Pennsylvania Form PA-40 line by line, and for the next step on the form, see Pennsylvania Form PA-40 lines 1b and 1c.
Who it applies to
The booklet speaks to any taxpayer with pay for services. Its overview reads: “PA-taxable compensation includes, but is not limited to: salaries; wages; tips; gratuities; commissions; bonuses; incentive payments; vacation and holiday pay;” and then “distributions from nonqualified deferred compensation plans; certain early distributions from retirement plans; and termination pay.”
Retirees reach this line from the retirement rules. The booklet’s single sentence that names them reads: “Pennsylvania does not impose income tax on payments you receive that are commonly recognized retirement benefits distributed from eligible employer-sponsored retirement plans”. The plan-by-plan rules are on the Pennsylvania page on retirement income that is not taxable, and this page does not repeat them. For the federal wage line that feeds a W-2, see W-2 boxes 1 to 8 explained.
What the instructions say
The booklet’s text for line 1a is spread over several pages. Each sentence below is printed as the booklet gives it.
| Line | What the form says |
|---|---|
| Form label | “Gross Compensation. Do not include exempt income, such as combat zone pay and qualifying retirement benefits. See the instructions.” |
| Overview, what it includes | “PA-taxable compensation includes, but is not limited to: salaries; wages; tips; gratuities; commissions; bonuses; incentive payments; vacation and holiday pay;” |
| Overview, continued | “distributions from nonqualified deferred compensation plans; certain early distributions from retirement plans; and termination pay.” |
| Box 16 of the W-2 | “The amount your employer reports in Box 16 of your Form W-2 usually shows your PA-taxable compensation if the W-2 includes PA withholding in Box 17.” |
| Box 16 and Box 1 | “The amount in Box 16 of your Form W-2 may be different from the amount in Box 1.” “PA law requires a PA employer to follow PA income tax rules to determine Box 16.” |
| W-2 with another state’s withholding | “If you are a PA resident and your W-2 does not include withholding from PA but includes withholding from another state, you should also complete and include the W-2 RW, Reconciliation Worksheet, with your return to reconcile the compensation to PA-taxable compensation.” |
| Forms 1099 and other statements | “If you receive Forms 1099 or other statements, your PA-taxable compensation is the gross amount that you received for performing services.” |
| Also taxable compensation, as the booklet lists | “Executor or executrix fees from an estate”; “Fiduciary fees from a trust”; “Jury duty pay”; “Director’s fees”; “Covenant not to compete payments”; “Damages or settlements for lost wages”; and “Other non-employee compensation for services rendered”. |
| Statement for those amounts | “If you have one or more of the above, you must include the amount in your gross compensation amount reported on Line 1a and include a statement that provides a description of the amount.” |
| The income list, how to read it | “The PA-40 line number on which to report the income follows each item.” |
| Income list, items marked Line 1a | “Employer provided fringe benefits, unless excludable”; “Severance pay”; “Honoraria”; “Expert witness fees”; “The value of property received as payment for services”; “Cash reimbursements for personal expenses, such as commuting and day care”. |
| Multiple W-2s | “Taxpayers with multiple W-2s and multiple types of compensation should submit a statement that lists the amounts and payors of the compensation along with the total amount reported on Line 1a.” |
| No Form W-2 | “If you do not have a Form W-2 or a federal substitute W-2, Form 4852, you must submit evidence of your PA compensation and tax withheld by providing pay stubs and a statement identifying your employer and the reason you do not have a Form W-2.” |
| Work outside Pennsylvania | “If you worked outside of Pennsylvania and your employer did not withhold PA personal income tax, your taxable PA wages may be higher or lower than the state wages reported on your Form W-2 in Box 16.” |
| Military pay, outside PA | “If you are a PA resident and your W-2 includes military pay for active duty outside PA, the amount for active duty pay outside PA is not taxable compensation for PA personal income tax purposes.” |
| Military pay, what to leave off | “Do not include the amounts included in Box 16 of your W-2 for active duty military pay earned outside PA or for nonresident military pay earned in PA in Line 1a of the PA-40.” |
| Reimbursements and allowances | “Report all reimbursements and allowances paid by your employer as compensation unless you meet all three of the following requirements:” |
| Reciprocal agreement states | “Pennsylvania has agreements with Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia.” “Generally, under these agreements, one state will not tax a resident of the other state on compensation that is subject to employer withholding.” |
| Resident of a reciprocal state working in Pennsylvania | “You report zero taxable compensation on Line 1a, and the PA tax withheld on Line 13.” |
| Retirement benefits | “Pennsylvania does not impose income tax on payments you receive that are commonly recognized retirement benefits distributed from eligible employer-sponsored retirement plans” |
The figures the form prints
One rate is printed inside a running sentence in the list of reasons to send a copy of the W-2 with an electronically filed return: “Your employer withheld PA income tax from your wages at a rate that is more than the 2025 tax rate of 3.07 percent.”
Where the result goes next
The next form line subtracts expenses. The form’s line 1c reads “Net Compensation. Subtract Line 1b from Line 1a.”. The line 9 label then says “Total PA Taxable Income. Add only the positive income amounts from Lines 1c, 2, 3, 4, 5, 6, 7, and 8.” For the same wage figure on the federal return, see Form 1040 line 1a.
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
- Counting exempt pay as compensation. The form’s label says “Do not include exempt income, such as combat zone pay and qualifying retirement benefits.”
- Assuming Box 1 of the W-2 and the Pennsylvania figure are always the same. The booklet says “The amount in Box 16 of your Form W-2 may be different from the amount in Box 1.”
- Entering fees or other pay without a description. The booklet says “you must include the amount in your gross compensation amount reported on Line 1a and include a statement that provides a description of the amount.”
Related: the Pennsylvania page on retirement income that is not taxable, W-2 boxes 1 to 8 explained, and Form 1040 line 1a.
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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.