Pennsylvania awarded $100 million more in tax credits in 2024-25 than it did in the prior year.

This year’s budget ups the ante even more.

The spending plan signed into law by Gov. Josh Shapiro last month makes a $700 million boost in tax credits. The amount available through tax credits is projected to top $1.8 billion this fiscal year.

If all the available tax credits are claimed, the state would be forgoing the equivalent of 3.8% of the state budget revenue, more than double the share of the budget designated for tax credits just five years ago, according to an analysis by the Independent Fiscal Office.

In 2020-21, the state awarded $584 million in tax credits, with the biggest chunk going toward educational improvement tax credits — tax breaks given to those who donate to funds that often are used to pay for scholarships for private school tuition. This year’s budget will make $590 million in educational improvement tax credits available — more than all of the tax credits made available in 2020-21 combined. Last year, the state made $540 million available for educational improvement tax credits. The $50 million boost for the 2025-26 fiscal year is targeted towards contributions benefiting students residing in economically disadvantaged school districts.

This year’s budget includes two new employer tax credit programs.

Act 56 of 2024, the tax code update passed as part of the budget deal, created a program allowing employers to make contributions into 529 savings accounts set up by their employees. The 529 savings accounts allow residents to make pre-tax contributions to save for college expenses.

Under the program, employers can contribute up to $500 into the 529 accounts of their employees. The tax credit for this program amounts to 25% of the employer’s contribution.

The fiscal office estimated that the 529 contribution program will cost the state $9 million.

In addition, this year employers will also be able to seek a tax credit if they help employees pay for the cost of child care. Again, the program caps the maximum employer contribution at $500 per worker. The tax credit is 30% of the employer contribution, capped at $150.

State boosts film production tax credit

The other notable tax credit change was a boost to the state’s film production tax credit. Last year, the state awarded $81 million in tax credits for productions filmed in Pennsylvania. The 2025-26 budget allows up to $100 million in film production tax credits.

To qualify for film production tax credits, 60% of the cost of the production must be tied to filming in Pennsylvania.

In 2024-25, 55 productions got film production tax credits.

Six film or television productions in Pittsburgh and the surrounding region shared $90 million in tax credits last year, while 31 projects in Philadelphia and the surrounding region shared $16.6 million in tax credits.

According to the Pennsylvania Film Office, every $1 awarded in film production tax credits is expected to generate 61 cents in state and local tax revenue and increase Pennsylvania’s gross domestic product by $6.75.