Two owners discussing their new businesses in Pittsburgh

Two owners discussing their new businesses in Pittsburgh

 

Business in Pittsburgh: Taxes and Incentives

Pittsburgh is driving the world in innovation through ingenuity, creativity and top talent. For years, entrepreneurs in tech and other inventive industries have recognized the potential for new businesses in Pittsburgh and western Pennsylvania. The region is known for being home to 300 steel-related businesses, but there is so much more to the Pittsburgh business environment.  

Throughout the region, dynamics are shifting toward exciting startups and innovative tech advancements. As a matter of fact, Startup Genome ranked Pittsburgh as #23 in its top 100 emerging startup ecosystems.  

Pennsylvania offers residents and businesses tax incentives, programs and credits. In terms of economic development, these benefits aid in opportunities for new businesses and residents alike. In fact, Pennsylvania provides tax incentives, such as tax-exempt financing, tax increment financing and tax abatements. These tax incentives work to increase investment in the state, improve the economic base, develop employment opportunities and contribute to the redevelopment of existing properties. 

A business owner talking on the phone while taking an order.

Starting a New Business in Pittsburgh

 

Starting a new business in the Pittsburgh area comes with many benefits, such as tax incentives and financial services provided by the Commonwealth of Pennsylvania. Some of the benefits of starting new businesses in Pittsburgh also transfer to businesses relocating to the city. Ranked as the third most livable city in the U.S. and with a powerful labor force of 1.29 million, Pittsburgh is an ideal place to incorporate.  

Enjoying life inside and outside of work within a supportive community is one of the many reasons new businesses and residents choose to work in downtown Pittsburgh, within the Pittsburgh area, or Allegheny County. Supporting passionate and creative individuals, Pittsburgh is at the center of innovation.  

In addition to these benefits, the city supports new businesses and entrepreneurs, has cost-effective commercial real estate and has affordable city housing. Pittsburghers also have access to the famous Strip District, which offers exciting storefronts, breweries, special events and old and new restaurants alike. 

 

A bridge in Lake Elizabeth during spring in the city of Pittsburgh.

What Are Pittsburgh’s Tax Rates and Incentives?

 

The Commonwealth of Pennsylvania’s corporate tax rate is 8.99%, effective January 2023. However, new legislation will reduce the corporate net income tax to 4.99% by 2031.  

Although Pennsylvania has a corporate income tax, it does not have a privilege or franchise tax. Unless a corporation is a C corporation (traditional corporation), the business is not subjected to state tax on net worth or income; but, when transferred to an individual, that person’s income will be taxed.  

Even though the state has corporate income tax, the city offers additional benefits. In fact, Pittsburgh corporations have access to various financial services, which include deductions for qualifying production activities, tax credits for specific activities and temporary “expensing” provisions. Let’s explore the different Pittsburgh taxes and incentive programs offered to business owners. 

 

Business owner doing taxes with calculator.

Business Tax Rates

Corporations in Pittsburgh, Pennsylvania are taxed federally on qualified worldwide income at a flat rate of 35% for corporations with taxable income greater than or equal to $18,333,333 USD. However, graduated rates for corporations start at as low as 15% when a corporation has a total taxable income of less than $18,333,333 USD. Aside from taxes such as social security and stamp duty (if applicable), corporations may also be required to pay additional taxes such as the payroll tax and/or real property tax. 

Pennsylvania’s business tax rate is 8.99%, effective January 2023. Exact breakdowns of business taxes depend on the corporation’s type. Here’s a look at the details: 

  • Corporations. Penn corporations must pay the state’s net income tax as well as a capital stock tax.  
  • S Corporations. Penn S corporations are usually not subject to a separate federal come tax. Instead, taxable income is transferred to the shareholders, which are then subject to federal tax.  
  • Limited Liability Companies (LLCs). LLCs in Pennsylvania are not required to pay an income tax to the state or federal government. Instead, members of the LLC will be taxed on their share of the business’s income.  
  • Partnerships. In Pennsylvania, income from the partnerships is distributed to each of the partners. From there, the partners pay federal and state tax on their distributed income.  
  • Sole Proprietorships. In the case of a sole proprietorship, any income from the business issued to the business owner will be subject to state income tax.  
Businesswoman receives a card from her manager.

Business Incentives

Pittsburgh, Pennsylvania is a fantastic location for new businesses and startups due to the nature of the city and number of financial services and tax incentives available. Pittsburgh has robust infrastructure which includes an interstate highway system, inland port, airport, and close proximity to other cities such as New York and Boston. Combined with state professional services and incentives for business owners, it’s no wonder a growing number of businesses are choosing Pittsburgh.  

  • Tax Abatements. Tax abatements lower real estate taxes, which aid in development of deteriorated areas.  
  • Tax Increment Financing (TIF). TIFs help in real estate development by allowing property tax to incrementally increase over a defined period, which can reach no more than 20 years. 
  • Tax Exempt Financing. This type of program allows borrowers to fund wide-ranging projects cost-effectively. Generally, tax exempt financing benefits borrowers by providing them with lower interest rates and longer repayment options.  
Talented employee speaking with her peers

Top Talent and Companies

Pittsburgh is famous for its industrial spirit. The city founded for the purpose of steel manufacturing has grown into a hub for exciting industries and companies, including cybersecurity, health care and life science, robotics, energy, AI, small businesses, non-profits and local businesses.  

Aided by top talent originating from the area’s high schools, vocational schools and colleges, Pittsburgh has the fifth largest share of educated millennials among the top 40 metros. As a top emerging startup ecosystem, Pittsburgh is home of the successes of startups like Duolingo, Honeycomb Credit, Marinus Analytics and many others, which all work to keep the industrial and innovative spirit of Pittsburgh alive.   

 

Ready to Do Business in Pittsburgh?

For more help assessing Pittsburgh’s taxes and incentives for businesses, please contact our team for assistance.