2027 Tax Changes We Are Monitoring: Pennsylvania

This page is different from our plain-language explainer of the new federal law. That explainer is here: 2027 Tax Changes: What You Need to Know. This page is the monitor, and it tracks two different things, kept separate. Part 1 is the new federal law and how it lands in Pennsylvania. Part 2 is changes in Pennsylvania tax law itself, the laws Harrisburg writes. They are not the same thing, and we do not mix them.

Every item below is marked as law or as pending. If something is not confirmed yet, we say so instead of guessing.

Part 1: The New Federal Law in Pennsylvania

The One Big Beautiful Bill Act is federal law. It was signed July 4, 2025. Most of its tax provisions apply to tax years 2025 and 2026, so they show up on the return you file in early 2027. The full plain-language explainer is here: 2027 Tax Changes: What You Need to Know. This part is only about how that federal law lands in Pennsylvania.

What has changed so far: federal

• July 4, 2025: The One Big Beautiful Bill Act was signed into federal law. Law
• September 2026: The Pennsylvania Department of Human Services began mailing letters to nearly 700,000 Medicaid expansion recipients about the new work rules starting January 1, 2027. Law
• November 1, 2025: Food stamp work rules expanded to adults ages 18 to 64. Law
• October 1, 2026: Medicaid eligibility changed for certain noncitizens. Law

Dates to watch: federal

• January 1, 2027: Medicaid work requirements start. It is also the deadline for Pennsylvania to opt into the federal scholarship tax credit.
• Late June 2027: Pennsylvania's fiscal year 2026 food stamp error rate is due. It decides how much of the food stamp benefit cost the state pays starting October 1, 2027.
• October 1, 2027: The state's share of food stamp benefit costs begins.

The state and local tax cap, and why it matters more here

The cap on state and local tax deductions is $40,400 for 2026 and $40,804 for 2027. It rises a little each year through 2029, then drops back to $10,000 in 2030. This matters more in Pennsylvania than in most states, because Pennsylvanians pay three layers of deductible tax: the state income tax at 3.07 percent, a local earned income tax (1 percent in Stroudsburg Borough, half to the borough and half to the school district), and property taxes, which are the largest piece for most Monroe County homeowners. Many homeowners here stopped itemizing when the cap was $10,000. Some will itemize again in 2026 and 2027, but only if their total deductions, including mortgage interest and charitable gifts, add up to more than the standard deduction ($33,200 for joint filers and $16,600 for single filers in 2027). Pennsylvania has no state itemized deduction, so this is a federal return question only.

Pennsylvania is one of about five states with no elective pass-through entity tax, so owners of S corporations and partnerships cannot bypass the cap at the entity level here. Bills to create one are pending in Harrisburg. See Part 2.

The child tax credit

The child tax credit is $2,200 per child under 17 for 2026, and $2,300 for 2027. Up to $1,700 of it is refundable for 2026, and up to $1,800 for 2027.

Form 1099-K

If you sell things online through PayPal, Venmo, eBay, or a similar service, you will only get a Form 1099-K if you took in more than $20,000 and had more than 200 transactions. Both have to apply. Your income is still taxable whether or not you get a form.

Forms 1099-NEC and 1099-MISC

If you pay a contractor or hire someone, you only have to issue a Form 1099-NEC or 1099-MISC for payments of $2,000 or more, up from $600. That applies to payments made after December 31, 2025, so it shows up on the forms filed in early 2027. For payments made in 2027, the threshold rises to $2,100. Do not mix this up with the 1099-K. They are different forms with different thresholds.

Four deductions that expire after 2028

Four new federal deductions, no tax on tips, no tax on overtime, no tax on auto loan interest, and an extra deduction for people 65 and older, are available for tax years 2025 through 2028 only. They expire after 2028. The amounts and limits are in the full explainer.

Health coverage and food assistance in Pennsylvania

These are federal changes, but Pennsylvania is where they land. Pennsylvania expanded Medicaid in 2015, so the new federal rules reach a large number of people here.

Medicaid work requirements start January 1, 2027

Starting January 1, 2027, adults ages 19 to 64 who get Medicaid through the expansion program must work, volunteer, train, or go to school at least half time, for 80 hours a month, or show household income of at least $580 a month. There are exemptions, including people who are medically frail, people who are pregnant, and people already meeting the work rules for food stamps or cash assistance. The Department of Human Services began mailing letters about the new rules in September 2026 to nearly 700,000 expansion recipients, followed by automated calls and texts. The department says it will first try to verify compliance from records it already holds, such as wage and school enrollment records. If you do not meet the requirement and do not qualify for an exemption, you lose coverage. The department's approach to the medical frailty exemption has not been approved by the federal Centers for Medicare and Medicaid Services yet. If you get Medicaid, you can report compliance through COMPASS or myCOMPASS PA, or through your county assistance office. The department's information line is 1-877-883-6383.

About 700,000 newly eligible expansion adults were covered in Pennsylvania as of October 2026, according to the Department of Human Services.

Medicaid checks every six months, and shorter retroactive coverage

For expansion adults, Medicaid eligibility will now be checked every six months instead of once a year. And if you apply for Medicaid, retroactive coverage now only reaches back one month for expansion adults, down from three months, or two months for other federally funded Medicaid. State-funded General Assistance stays at three months.

Eligibility for certain noncitizens changed on October 1, 2026 for Medicaid.

Food stamp work rules already changed

The food stamp work rules already changed. Since September 1, 2025, able-bodied adults without dependents ages 18 to 54 have had to work, train, or volunteer at least 20 hours a week, or benefits are limited to three months in any three-year period. The earliest anyone in Pennsylvania lost benefits under that rule was December 1, 2025. On November 1, 2025, the rules expanded: the age range rose to 64, parents are now exempt only if their youngest child is under 14, and the exemptions for veterans, people experiencing homelessness, and former foster youth 24 and under were removed. Pennsylvania has said it will keep exempting people experiencing homelessness using state discretion, but that is not settled yet. Nearly two million Pennsylvanians receive food stamps. The Shapiro Administration estimates about 144,000 Pennsylvanians are at risk of losing them under the new rules.

The state starts paying part of the food stamp bill on October 1, 2027

From October 1, 2027, Pennsylvania will also have to pay part of the cost of food stamp benefits, from 5 to 15 percent depending on the state's payment error rate. Pennsylvania's error rate for fiscal year 2025 was 9.21 percent, which would mean a 10 percent share, about $381 million to $410 million a year. The fiscal year 2026 error rate, due in late June 2027, could lower that if it falls below 8 percent. This is a state budget cost, not a change to who gets benefits. Separately, since October 1, 2026, the state pays 75 percent of the cost of running the program, up from 50 percent.

The federal scholarship tax credit: Pennsylvania has not decided

The new federal scholarship tax credit lets a donor claim up to $1,700 a year, or $3,400 for a married couple, for gifts to organizations that grant scholarships for kindergarten through 12th grade. But each state must opt in by January 1, 2027 for contributions from that date. As of November 13, 2026, Pennsylvania had not decided. Thirty-two states had opted in, two had declined, two had vetoed, and 15, including Pennsylvania, were undecided. Governor Shapiro said on October 7, 2026 that he is open to it and expected to announce a decision within weeks. A bill to require Pennsylvania to opt in has been introduced. This is a live deadline, and we will update this page the day a decision is announced.

Pending, not law: federal

A federal Senate farm bill, S.5526, would delay the state's share of food stamp benefit costs by one year, from October 1, 2027 to October 1, 2028. It has not passed.

Part 2: Changes in Pennsylvania Tax Law

This part is about the tax laws Harrisburg writes: the state corporate tax, the state personal income tax, the state credits, and how Pennsylvania follows or does not follow the federal rules. None of this is federal law. The federal law is in Part 1.

What has changed so far: Pennsylvania

• November 14, 2026: This page was created. The corporate net income tax rate for 2027 is confirmed at 6.99 percent, and no 2027 local tax rate has been adopted yet in Monroe County or Stroudsburg Borough. Law
• July 2026: The 2026-27 state budget was signed. It kept the corporate tax phase-down unchanged and did not enact combined reporting or accelerate the rate cut. Law

Dates to watch: Pennsylvania

• November 25, 2026: Monroe County presents its proposed 2027 budget.
• December 16, 2026: Monroe County plans to adopt its 2027 budget.
• December 31, 2026: The Department of Revenue must report to the General Assembly on the impact of decoupling Pennsylvania's corporate tax from several federal provisions.

The corporate net income tax falls to 6.99 percent for 2027

The corporate net income tax rate falls to 6.99 percent for tax year 2027, down from 7.49 percent in 2026. The phase-down was set by Act 53 of 2022: 8.99 percent in 2023, 8.49 percent in 2024, 7.99 percent in 2025, 7.49 percent in 2026, 6.99 percent in 2027, 6.49 percent in 2028, 5.99 percent in 2029, 5.49 percent in 2030, and 4.99 percent in 2031 and after. It drops by half a point each year, with no conditions attached.

Businesses can use more of their past losses

The cap on net loss carryovers rises from 50 percent of taxable income in 2026 to 60 percent in 2027, then 70 percent in 2028 and 80 percent in 2029 and after. One catch: losses from before 2025 stay under the old 40 percent cap under a dual formula. The 20-year carryforward stays in place.

The personal income tax is unchanged

The personal income tax is unchanged at 3.07 percent, a flat rate. No rate change was enacted for 2027.

Pennsylvania does not follow federal bonus depreciation

Pennsylvania does not follow the federal bonus depreciation rule. If your business buys equipment, the federal return may let you deduct the full cost in the year you buy it, but Pennsylvania requires you to add that deduction back. The gap between the federal and state treatment gets wider for assets bought in 2026 and 2027. Act 45 of 2025 also decouples Pennsylvania's corporate tax from several other new federal provisions: deductions for qualified production property, research and experimentation costs (which Pennsylvania spreads at 20 percent a year over five years), and business interest, where Pennsylvania freezes the federal rule as it stood on December 31, 2024. The Department of Revenue must report to the General Assembly by December 31, 2026 on the impact of this decoupling. We will add that report here when it is published.

Section 179 does follow the federal rule

One place where Pennsylvania does follow the federal rule is Section 179. Since 2023, Pennsylvania's Section 179 limits match the federal limits. For 2026, the federal limit is $2,560,000, phasing out from $4,090,000. Note: some older guides still say Pennsylvania caps Section 179 at $25,000. That is outdated and wrong.

Form 1099 thresholds follow the federal rule

Pennsylvania has no lower state threshold for Form 1099-K, and the state follows the federal thresholds for Forms 1099-NEC and 1099-MISC. The federal thresholds are in Part 1.

The child care credit, and a trap for 2026 returns

Pennsylvania's Child and Dependent Care Enhancement Tax Credit is worth 100 percent of the federal credit, up to $1,050 for one child or dependent and $2,100 for two or more, with minimums of $600 and $1,200. It is refundable. Here is the trap for the 2026 returns filed in 2027: the federal credit rose to 50 percent of expenses, up to $1,500 for one child and $3,000 for two or more. Pennsylvania law does not automatically follow the federal change, so the state credit will not rise unless the legislature acts. Senate Bill 1382, introduced June 18, 2026, would align the state credit with the federal one. It has not passed. See the pending bills below.

Pennsylvania has no state child tax credit. The credit above is for child and dependent care, a different credit.

The Working Pennsylvanians Tax Credit

A newer credit worth knowing about: the Working Pennsylvanians Tax Credit is 10 percent of the federal earned income tax credit, up to $805, and it is refundable. It applies automatically if you qualify for the federal credit. It was first claimable on 2025 returns filed in 2026, and it continues for 2026 returns filed in 2027. The Department of Revenue estimates it reached 940,000 workers in its first year.

The Property Tax and Rent Rebate Program

The Property Tax and Rent Rebate Program was expanded by Act 7 of 2023: the maximum standard rebate rose from $650 to $1,000, and the income cap was unified at $45,000 and tied to a yearly cost-of-living adjustment. For taxes or rent paid in 2025 and claimed in 2026, the income limit was $48,110, with standard rebates from $380 to $1,000 depending on income, and a supplemental rebate of up to $500 for homeowners whose taxes exceed 15 percent of their income. The program is for people 65 and older, widows and widowers 50 and older, and people with disabilities 18 and older. Half of Social Security income does not count toward the income test. You must reapply every year. For taxes or rent paid in 2026 and claimed in 2027, the income limit has not been published yet. We will add it here when the Department of Revenue announces it.

The new Affordable Housing Tax Credit

Act 45 of 2025 created a state affordable housing tax credit. The Pennsylvania Housing Finance Agency may sell $10 million a year in credits, and the proceeds fund low-income rental housing. This was enacted in 2025 and is operating in 2026 and 2027. It is not a new 2027 change.

Local: Monroe County and Stroudsburg

Local taxes are set here in Pennsylvania, by the county, the borough, and the school district, so they belong in this part of the page. As of November 14, 2026, no 2027 local tax rate has been adopted in Monroe County or Stroudsburg Borough. Here are the current rates, and what is coming.

Monroe County property tax

Monroe County property tax is 5.4773 mills for 2026. The proposed 2027 county budget will be presented on November 25, 2026, and the county plans to adopt its 2027 budget on December 16, 2026. No 2027 millage has been published yet.

Stroudsburg Borough property tax

Stroudsburg Borough property tax is 10.489 mills for 2026. No 2027 borough budget or tax ordinance had been posted as of November 14, 2026.

Stroudsburg Area School District property tax

The Stroudsburg Area School District property tax is 27.395 mills, about 27.40, for the 2026-27 school year. The 2027-28 rate will not be set until June 2027, when school budgets are adopted.

Local earned income tax and local services tax

The local earned income tax in Stroudsburg Borough is 1 percent, half to the borough and half to the school district, collected by Berkheimer. No change has been found for 2027. The local services tax in Stroudsburg Borough is $52 a year, or $1 a week, with $5 going to the school district. You are exempt if you earn less than $12,000 in the borough. No change has been found for 2027. Fifty-two dollars is the maximum the state allows.

Do not confuse Stroudsburg Borough with East Stroudsburg Borough, a different borough nearby. East Stroudsburg's draft 2027 budget would raise its total millage from 8.9654 to 10.2655, with a public hearing and adoption on December 1, 2026. That is not Stroudsburg Borough.

Pending, not law: Pennsylvania

These proposals could change Pennsylvania taxes in 2027 or later, but none of them is law. We list them here so you can see what is being debated in Harrisburg, and we will move any of them to the sections above the day one passes.

Combined reporting for corporations

House Bill 1610 would require related companies in a unitary group to file one combined corporate return. It passed the House 104 to 99 on June 25, 2025, and has stalled in the Senate Finance Committee. Its Senate companion, Senate Bill 1208, is also in Senate Finance. The governor's 2026-27 budget proposed combined reporting for tax years beginning after December 31, 2026, but it was removed from the final budget signed in July 2026. After the November 3, 2026 election, news reports said Democrats were set to take full control in Harrisburg for the first time since 1993, with combined reporting among their top priorities. That is political reporting, not law, and it does not make any pending bill into law.

Cutting the corporate rate faster

The governor's 2025-26 budget proposed cutting the corporate rate faster, by 0.75 points a year from 2026, reaching 4.99 percent in 2029. That was not enacted, and the 2026-27 proposal dropped it. Senate Bill 207 would cut the rate to 4 percent from January 1, 2026. It was reported from the Senate Finance Committee on March 26, 2025, and has not passed.

A pass-through entity tax

Senate Bill 396 and House Bill 1703 would create an elective pass-through entity tax, letting S corporations and partnerships pay state tax at the entity level to get around the federal SALT cap. Senate Bill 396 was reported from the Senate Finance Committee on April 1, 2025, and is pending in Senate Appropriations. It has not passed. Senate Bill 253 would give Pennsylvania residents a credit for pass-through entity tax paid to other states. It was also reported from Senate Finance on April 1, 2025, and is awaiting a full Senate vote.

Aligning the child care credit

Senate Bill 1382, introduced June 18, 2026, would raise Pennsylvania's child care credit to match the higher federal credit for 2026. It has not passed.

Requiring Pennsylvania to opt into the scholarship tax credit

Bills to require Pennsylvania to opt into the federal scholarship tax credit have been introduced. None has passed. The governor's decision is pending to January 1, 2027. The credit itself is covered in Part 1.

All of the 2025-26 session bills above were pending when the session ended with the 2026 election cycle. Do not assume any of them carries over automatically. We will verify reintroduction in the new session before listing any of them as live in 2027.

What We Could Not Verify Yet

What to Do Now

You do not have to sort all of this out alone. Here is a short list to start with.

For the federal changes

• If you or someone in your family gets Medicaid or food stamps, know the new work and check-in rules before January 1, so nothing catches you by surprise.

For the Pennsylvania changes

• If you own a business in Pennsylvania, check whether the 6.99 percent corporate rate and the 60 percent loss cap change your 2027 estimated payments.
• If you buy equipment, remember Pennsylvania does not follow the federal bonus depreciation rule. Plan for the add-back.
• If you pay for child care, do not count on the higher state credit until Senate Bill 1382 or a similar bill passes.
• If you live in Monroe County, watch for the county budget adoption on December 16, 2026, and check back here for the 2027 millage.
• Call us with questions. A short conversation now can keep a small problem from becoming a big one later.