Who pays the School Income Tax?
If you live within the School District of Philadelphia and have unearned income, you are subject to a School Income Tax of 3.9004% for tax year 2016. (Not to be confused with the City’s Real Estate Tax, which also funds the School District of Philadelphia!) The School Income Tax is due April 18 this year.
Examples of unearned income include:
- Dividends, some types of interest, and annuities
- Net rental income only if you also live on the property and rent a portion out for residential use, for example a duplex. (For the School Income Tax, this type of rental income is limited to properties with a maximum of four units.)
- Remember, reasonable operating costs for rental properties, such as mortgage interest paid, repairs, depreciation and the Real Estate Taxes paid for the property, are deductible!
- Short-term capital gains from the sale of tangible or intangible property or real estate owned for less than six months before the date of sale. Examples of tangible or intangible property include: vehicles, equipment, machinery, patents, trademarks, or copyrights.
- Cash prize winnings from the Pennsylvania Lottery
- Punitive damages
- Royalties
Don’t miss these other deductions and exclusions to reduce your School Income Tax liability
In addition to the reasonable operating costs listed above, a few other deductions can reduce your SIT liability, such as:
- Reasonable costs and expenses incurred in the production of the unearned income, such as: the cost of a safe deposit box and the fee for preparation of the School Income Tax return
- Margin interest
Get more details about the School Income Tax, including a list of unearned income covered by the tax and the full regulations.
Photo by J Fusco.