Philadelphia School Income Tax: What You Should Know
Written by: Natalie Klyashtorny
The School Income Tax applies to income derived from S corporations and partnership distributions, rental income, estates and trusts income, short term capital gains, certain forms of dividends and interest income and “other” taxable income such as royalty or copyright income, an award of punitive damages, the monetary value of any prize or award, income from any annuity under an insurance policy (unless payable from an employment contract as part of retirement or pension plan), and net proceeds from gambling.
All Philadelphia residents, even those who live in the City a portion of the calendar year, are required to file the School Income Tax return and failure to do so can subject one to substantial fines and other penalties.
Considering the diversity of “unearned income” that is subject to the School Income Tax (and the accompanying exemptions), it would behoove all Philadelphians to consult closely with their accountants or financial advisors to ascertain that they are in compliance with the requirements of the School Income Tax.