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School Income Tax

Overview

The School District of Philadelphia imposes a tax on various classes of unearned income which are not subject to Philadelphia Business Income and Receipts Tax or Wage Tax. If you are a Philadelphia resident for a portion of the year, the amounts are pro-rated for your period of residency. Interest earned on savings and checking accounts is exempt. Likewise, interest received from bonds or debt obligations of the Commonwealth of Pennsylvania or its political subdivisions or direct obligations of the Federal Government is exempt from the tax.

The School Income Tax (SIT) is filed annually. The failure of any person to receive a tax return does not excuse them from the responsibility of filing a return and paying the tax due on time.  The tax can be filed and paid on-line.

Taxable Income for School Income Tax

Dividends

All dividends are taxable unless they are a return of capital on a life insurance policy, from common stock of a National Bank, or from United States government obligations. All other dividends are taxable regardless of the source. You cannot reduce this income by reinvested dividends.

Interest Income

Interest income on the Federal or State tax return may be included. Examples of taxable interest include, but are not limited to: interest income from securities, mortgages, private loans, insurance policies, bank notes, repurchase agreements, Fannie and Ginnie Mae obligations, and other sources.

S Corp Income

The pro rata share of taxable income of shareholders froma a "Subchapter S" Corporation with adjustments for pass-through items (i.e., income and deductions items). If this is a net loss, enter "0" on SIT return.

Partnership Distributions

The pro rata share (Distributions thru K1 ) of any limited partnership income not otherwise subject to Philadelphia Net Profits Tax is taxable. If this is a net loss, report "0" on SIT return.

Estates and Trusts Income

Income from estates and trusts is taxable only if it is received by or credited to the beneficiary and is the type of income that would normally be subject to this tax. Example: If the income from a trust consists of interest and dividends, the amount taxable would be determined as reported Dividend and Interest Income on the SIT return.

Short Term Capital Gains (Held 6 months or less)

Short term capital gains. Net gains and losses are taxable from the sale of tangible and intangible personal property and real property held for six months or less. Note: This holding period differs from the 12 months or less period used by the Federal Government to identify short term capital gains.

Rental Income

Net rental income received from the ownership of real or personal property is taxable unless the income is subject to Philadelphia Business Income and Receipts and/or Net Profits taxes. If this is a net loss, enter "0" on SIT return. For School Income Tax purposes, report the net rental activity from a property which meets all of the following three criteria:
  • It is the principal residence of the owner;
  • It is totally residential;
  • It consists of 4 rental units or less including the owner occupied unit.
If the rental activity does not meet these criteria, you must file Business Income and Receipts and/or Net Profits taxes. Owners of properties with 5 or more units must file Business Income and Receipts and/or Net Profits tax returns even if they reside on the premises.

Other Taxable Income

  • Royalty or copyright
  • An award of punitive damages
  • The monetary value of any prize or award
  • Income from any annuity under a policy of insurance unless payable from a contract of employment as a part of retirement or pension plan
  • Net proceeds from gambling (except Pennsylvania Lottery). If this is a net loss, enter "0" on SIT return Exempt Income for School Income Tax.

Exempt Income for School Income Tax

Dividends

  • All dividends from Insurance Policies are exempt. (These are not true dividends by a return of capital)
  • All dividends on Savings Deposits and Saving Certificates issued by:
    • A Private Bank
    • Building & Loan Association
    • Saving & Loan Association
    • Credit Unions
    • Savings Bank
    • Bank, Bank & Trust Co. or a Trust Company

Interest

  • Interest on Public Loans and Bonds issued by:
    • The Commonwealth of Pennsylvania
    • Political Subdivisions of the Commonwealth of Pa.
    • Municipal Authorities Incorporated in Pennsylvania
    • The United States Government
  • Money Market Bank Accounts
  • IRA - Individual Retirement Accounts
  • CDs - Certificated of Deposits
  • A Money Market Certificate only if purchased from a Bank or Saving & Loan Association
  • Annuity/Pension- If either are received thru a contract of employment

Other Income

  • All Pennsylvania State Lottery Winnings
  • Income from Operation of Business
  • Old Age, Retirement Special Security & Pensions
  • Sick & Disability Benefits
  • Workmen's & Unemployment compensation benefits
  • Active Military Service Pay
  • Bonuses for active Military Service
  • Death Benefits, Insurance Policy Proceeds, Gifts & Bequests
  • Compensatory Damages

Overview

Tax Type Code
29

Rate
3.924% on unearned income

Mail Returns to
Philadelphia Dept. of Revenue  
PO Box 389 
Philadelphia, PA 19105‐0389