Pennsylvania Expands Tax Credits for Workers and Affordable Housing in New Budget
Pennsylvania residents will soon see expanded financial relief through two key tax credit programs as part of the state’s recently passed $50.1 billion budget. Lawmakers have created a new credit for low- and moderate-income workers and significantly revamped an existing affordable housing credit, initiatives lauded by Democrats as crucial wins despite concessions made on other priorities.
Working Pennsylvanians Tax Credit: A Boost for Low-Income Households
A new Working Pennsylvanians Tax Credit aims to put money directly back into the pockets of those who need it most. The credit mirrors the federal Earned Income Tax Credit (EITC), reducing tax burdens and potentially providing cash refunds to eligible individuals and families.
“Something that folks in the Capitol have been talking about for years and years and years,” Gov. Josh Shapiro told reporters following the budget’s passage. “Working together, we got it done, and the good people of Pennsylvania are the beneficiaries.”
State Senate President Pro Tempore Kim Ward (R., Westmoreland) echoed this sentiment, stating, “We put money back into the pockets of low-income, working Pennsylvanians. They can take that money and they can use it for shoes, food, long-term care, daycare, anything they want to use it for that helps them maintain their quality of life.”
Who Qualifies for the Credit?
The Shapiro administration estimates approximately 940,000 Pennsylvanians will qualify for the credit when they file their 2025 taxes, resulting in roughly $193 million in relief. Eligibility is based on annual income, with higher thresholds for couples and those with children.
For example, a married couple with one child can earn up to $57,554 and still qualify, while a single filer with one child must earn under $50,434. A complete breakdown of income eligibility requirements can be found [here](link to income eligibility breakdown).
Additional requirements include having investment income under $11,950, a valid Social Security number, and being a U.S. citizen or legal resident for the entire year. Individuals between the ages of 25 and 65 claiming the credit without children must also have lived in the U.S. for more than half the year and not be claimed as a dependent by another person.
How Much Can Pennsylvanians Save?
The state’s tax credit will equal 10% of the federal EITC, with a federal maximum of just over $8,000. This translates to a potential state credit of up to $800. If the credit exceeds a taxpayer’s tax liability, the difference will be refunded.
The Shapiro administration has developed a tool to help residents determine their eligibility and estimate their potential credit amount based on filing status, dependents, and income [here](link to tax credit calculator).
The Working Pennsylvanians Tax Credit will first apply to tax returns filed in 2025. The state Department of Revenue will automatically apply the credit to online filers who claim the federal EITC. Assistance will be available for those filing by paper or in person; contact information for the agency and regional offices can be found [here](link to Department of Revenue contact info) and [here](link to regional office info).
Affordable Housing Tax Credit: A New Approach to Investment
Lawmakers also amended the Affordable Housing Tax Credit, established in 2020, to provide the Pennsylvania Housing Finance Authority (PHFA) with greater flexibility in allocating funds to projects benefiting low-income individuals.
Previously, the credit offered up to $10 million annually in tax relief to investors partnering with developers on affordable housing projects. The PHFA selected projects based on the amount of investment they attracted. However, this system often prioritized projects deemed most profitable by investors, rather than those with the greatest need.
The revised system shifts the focus. Investors will now bid on the tax credits themselves, regardless of direct involvement in a specific housing project. The resulting revenue will be channeled into a PHFA-controlled fund, which will then distribute grants to affordable housing developers.
“This takes that [investment-driven selection] out of the equation,” explained PHFA Executive Director Robin Wiessmann.
Phyllis Chamberlain, executive director of the Housing Alliance for Pennsylvania, noted the change mirrors the state’s tax credit for mixed-use site revitalization, aiming to increase private investment without additional state costs. The goal is to attract a broader range of investors and increase competition for the credits, ultimately allowing the state to secure more favorable terms.
State House Speaker Joanna McClinton (D., Philadelphia) emphasized the collaborative effort behind the change, stating that discussions with PHFA and housing advocates highlighted the need for greater flexibility in funding and purchasing the tax credit to “close the financial gaps and really get these projects moving along.” She added, “Now, we’ll have, going forward, a whole tax credit that will really help people in these projects to be able to get more interest from the private sector for investment.”
These changes represent a significant step towards bolstering financial security for working Pennsylvanians and expanding access to affordable housing across the commonwealth.
