Highlights of the 2024-2025 Pennsylvania Budget
On July 11, 2024, Pennsylvania Governor Josh Shapiro signed into law a $47.6 billion state budget for the 2024-2025 fiscal year. The state budget excludes any new taxes and is focused on investments in economic development, education, workforce development, public transit, infrastructure and reducing taxes.
Key Tax Provisions in the Pennsylvania Budget
There is no increase on sales or income tax rates, however, businesses can deduct more losses and students can deduct loan interest. Key tax provisions include:
- Continuing to reduce the Corporate Net Income Tax by 0.5% until 2031 when it will reach 4.99%.
- Gradually raising the cap on the tax treatment of net operating losses (NOLs) by 10% every year over the next four years from 40% to 80%, which allows businesses to carry losses forward and deduct them against future profits to reduce their tax liability so they can reinvest in their business and people. Taxpayers may need to track their NOLs by year.
- A personal income tax (PIT) deduction for the amount of student loan interest paid during a tax year by a PA resident. The deduction cannot exceed $2,500 per year and may not result in taxable income being less than zero. The student loan interest payment deduction is effective for student loan payments made after December 31, 2023.
- Cryptocurrency companies will no longer qualify for a tax exemption that was originally intended to encourage the development of data centers in PA.
- The cap on Educational Tax Credit Programs increases by $75 million (14%).
| Educational Tax Credits Summary | Increase in 23/24 | 23/24 credits still available on June 1, 2024 | 2024/25 Cap in SB700 | Increase in 24/25 in SB700 |
|---|---|---|---|---|
| EITC – Scholarship Organizations | $62,000,000 (24%) | $25,000,000 | $375,000,000 | $50,000,000 (15%) |
| EITC- Supplemental Scholarship for Economically Disadvantaged | $48,000,000 (400%) | $47,000,000 | $60,000,000 | $0 (0%) |
| EITC- Educational Improvement Organizations | $10,000,000 (22%) | $0 | $74,500,000 | $20,000,000 (37%) |
| EITC- Pre-Kindergarten Scholarship Organizations | $10,000,000 (49%) | $9,000,000 | $30,500,000 | $0 (0%) |
| Educational Improvement Tax Credit (EITC) Total: | $130,000,000 (38%) | $81,000,000 | $540,000,000 | $70,000,000 (15%) |
| Opportunity Scholarship Tax Credit (OSTC) Total: | $20,000,000 (31%) | $18,000,000 | $90,000,000 | $5,000,000 (6%) |
| Educational Tax Credits (EITC and OSTC) Total: | $150,000,000 (37%) | $99,000,000 | $630,000,000 | $75,000,000 (14%) |
Other Budget Highlights
Besides the key tax provisions that we discussed, here are some of the other highlights in the 2024-2025 budget:
- Over $35 million increase for Pennsylvania State System of Higher Education (PASSHE) schools
- Over $1 billion increase for Pre-K to 12 education funding
- Over $140 million for grants, scholarships and other programs that will make higher education more affordable in PA
- $20 million for student teacher stipends
- New cyber charter school tuition reform will take effect January 1, 2025
- $70 million for affordable housing through the Pennsylvania Housing Affordability and Rehabilitation Enhancement (PHARE) Housing Program
- Over $550 million in economic development programs through the Department of Community and Economic Development.
- $10 million for agricultural innovation that supports innovations to improve energy efficiency, water quality, reduce water consumption and odors and attract new agricultural businesses to the Commonwealth.
If you have any questions on how the Pennsylvania’s fiscal year budget will affect you, please contact a Brown Plus advisor.