Pennsylvania Subtractions/Adjustments to Income
Military Pay Subtraction
Military active duty pay for Pennsylvania residents earned outside the state is excludable from Pennsylvania income.
Contributions to a Medical Savings Account and 529 Tuition Account Contributions
Deductions are allowed for: Medical Savings Account contributions; Health Savings Account contributions; and IRC Section 529 Tuition Account Program contributions. If you are claiming a deduction for any of these contributions you made, you must enter a code for the type of deduction you are claiming in the block provided next to the line description. Descriptions of the four codes that can be entered in that block are as follows:
- M – Medical Savings Account contribution deduction
- H – Health Savings Account contribution deduction
- T – Tuition Account Program contribution deduction or
- C – Combined deduction from two or all three contribution deductions
Pennsylvania allows a maximum deduction of $14,000 per beneficiary, per year ($28,000 if married filing jointly, assuming each spouse had income of at least $14,000) from their Pennsylvania taxable income for the purposes of determining their state income taxes. For additional information on deductions and limitations, see the instructions for PA Schedule O on Pages 30 and 31.
Note: You may not claim a deduction for a rollover of an account from one IRC Section 529 plan into another IRC Section 529 plan. You also may not claim a deduction for the changing of beneficiaries within an account for an IRC Section 529 plan.
CAUTION: The amount you report on Line 10 cannot exceed the Total PA Taxable Income reported on Line 9. The amount reported on Line 10 on a joint tax return also cannot exceed the Total PA Taxable Income included in Line 9 for a taxpayer or spouse that would be calculated had the taxpayer or spouse filed separately.
CAUTION: Do not report any medical insurance premiums or itemized medical expenses from Federal Schedule A on this line.
Medical Savings Account and Health Savings Account Contributions
Pennsylvania follows federal rules for these deductions. If you can take these deductions on your federal return and you wish to claim them for PA purposes, you must complete PA Schedule O and include a copy of page 1 of your Federal Form 1040 with your PA income tax return. You may not claim these deductions if you cannot claim them for federal income tax purposes.
Pennsylvania Schedule UE
Allowable employee business expenses for PA purposes are similar to, but not the same as, expenses for federal purposes. PA law permits expenses required to perform the duties of a job or profession.
Allowable Pennsylvania Employee Business Expenses Must Be:
- Ordinary, customary, and accepted in the industry or occupation in which you work;
- Actually paid while performing the duties of your employment;
- Reasonable in amount and not excessive;
- Necessary to enable you to properly perform the duties of your employment; and
- Directly related to performing the duties of your occupation or employment.
Note: You may deduct 100% of your PA allowable unreimbursed employee business expenses. PA law does not have a federal expense and percentage accounting limitations and thresholds. If your employer does not reimburse you, you may reduce your compensation by your allowable expenses.
For additional information pertaining to the PA Schedule UE, please click here and refer to Page 59 of the Form PA-40 instructions.
To enter any of the above in your Pennsylvania state return, select Adjustments to Income, in the state program.