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 leading-edge 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. However, there is so much more to the Pittsburgh business environment.
Throughout the city, 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 worldwide.
Pennsylvania offers tax incentives, programs and credits in support of economic and community developments. These include tax incentives such as tax-exempt financing, tax increment financing and tax abatements. These incentives work to increase investment in the state, improve the economic base, develop employment opportunities and redevelopment existing properties.
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 or within the Pittsburgh area. 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 one of the region’s most exciting assortments of storefronts, breweries, special events and old and new restaurants alike.
What Are Pittsburgh’s Tax Rates and Incentives?
Pennsylvania has a corporate income tax, but 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, including deductions for qualifying production activities, credits for specific activities and temporary “expensing” provisions. Let’s explore the different tax rates and business incentives offered to Pittsburgh business owners.
Business Tax Rates
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.
- S Corporations. Penn S corporations are usually not subject to a separate federal income. 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.
The Pittsburgh region is a fantastic location for new businesses and startups due to the vibrant environment and availability of financial services and tax incentives. Pittsburgh has robust infrastructure, including an interstate highway system, inland port, international 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.
Top Talent and Companies
Pittsburgh is famous for its industrial spirit. The city founded on steel manufacturing has grown and transformed to become home to an array of exciting industries and companies, including advanced and additive manufacturing, cybersecurity, financial and business services, healthcare 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 and universities, Pittsburgh has the fifth largest share of educated millennials among the top 40 U.S. metros. As a top emerging startup ecosystem, Pittsburgh is home to successful ventures like Duolingo, Argo AI, Honeycomb Credit, Marinus Analytics and many others, all working to keep the industrial and innovative spirit of Pittsburgh alive.
Ready to Do Business in Pittsburgh?