Bank Gap by State
The Bank Gap in Pennsylvania
Pennsylvania has taxed all income at a flat 3.07% rate for decades, one of the lowest flat rates in the country, which keeps the Bank Gap math simple even though Philadelphia adds its own local wage tax on top for residents.
Last reviewed August 7, 2026 · SwitchWize Research Desk
Before PA tax
$1,005/yr
on a $25,000 balance
After PA 3.07% tax
$974/yr
recoverable by switching
On a $25,000 balance, the gap is about $1,005 a year before tax. After Pennsylvania's 3.07% top income-tax rate on the additional interest, you keep about $974. Because Treasury interest is exempt from Pennsylvania income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.
Estimated Bank Gap by balance
| Balance | Current earnings | Better-fit earnings | Estimated Bank Gap | After PA tax |
|---|---|---|---|---|
| $5,000 | $19 | $220 | $201 | $195 |
| $10,000 | $38 | $440 | $402 | $390 |
| $25,000 | $95 | $1,100 | $1,005 | $974 |
| $50,000 | $190 | $2,200 | $2,010 | $1,948 |
| $100,000 | $380 | $4,400 | $4,020 | $3,897 |
Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After PA tax" column applies PA's 3.07% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.
Why Pennsylvania changes the math
Pennsylvania's state income tax on interest is a flat 3.07%, though Philadelphia and some other municipalities layer on their own local wage tax that can apply to residents. Treasury interest is exempt from the state-level tax, giving a modest after-tax edge to T-Bills.
Living costs in and around Philadelphia run above the rest of Pennsylvania, which raises typical emergency-fund sizing for savers in that metro relative to the state's smaller cities and rural areas.
Cost of living in Pennsylvania is near the national average outside metro Philadelphia, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.
Because Pennsylvania taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.
Open the short-term savings toolFrequently asked questions
Does Pennsylvania tax high-yield savings account interest?
Is a high-yield savings account worth it in Pennsylvania?
Are T-Bills better than a HYSA for Pennsylvania savers?
Your personal Bank Gap
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Calculate my Bank GapEducational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.