Philadelphia School Income Tax: Filing and Payments

The Philadelphia School Income Tax (SIT) is a local tax imposed on specific types of unearned income received by residents of Philadelphia. Its primary purpose is to provide a dedicated funding source for the School District of Philadelphia. This tax operates separately from other local taxes, such as the more widely known Philadelphia Wage Tax, which applies to earned income like salaries and wages.

Determining Your Filing Obligation

Your requirement to file a School Income Tax return is based on two factors: your residency and the type of income you receive. Any individual who is a resident of Philadelphia for any part of the year is subject to the tax on applicable income. This includes part-year residents, whose taxable income may be prorated based on the period they lived in the city.

The tax applies to various forms of investment and other unearned income. Taxable categories include:

• Dividends and certain types of interest
• Royalties
• Net gains from the sale or exchange of property
• Income from estates and trusts
• Distributions from S corporations
• Net profits from limited partnerships
• Net proceeds from gambling, including cash prizes from the Pennsylvania Lottery
• Income from short-term rentals of a primary residence

It is equally important to understand which income sources are not subject to the SIT. The tax does not apply to earned income, such as salaries, wages, tips, or commissions. Other non-taxable income includes payments from pensions, Social Security benefits, and unemployment compensation. Interest earned from savings accounts, checking accounts, and certificates of deposit issued by banks is also not taxable under the SIT rules.

Information and Forms for Filing

Before you can complete your School Income Tax return, you must gather several key documents. The most important of these is your completed federal income tax return, Form 1040. Specific schedules from your federal return are necessary to accurately report income on the SIT form, such as Schedule B for interest and dividends and Schedule D for capital gains.

The official SIT return form is available for download on the City of Philadelphia’s Department of Revenue website. When filling out the form, you will transfer specific figures directly from your federal schedules. For instance, the total amount of your ordinary dividends from Form 1040 will be entered on the corresponding line of the SIT return. Similarly, your net short-term capital gains from Schedule D are reported on a designated line.

Once you have summed all applicable income, you calculate your tax liability using the current SIT rate of 3.74%. The city also provides a poverty exemption for individuals with very low income. If your total taxable and non-taxable income falls below specific thresholds published annually, you may not have to pay the tax, though you may still be required to file the return to claim the exemption.

Submitting Your Return and Payment

You must submit it by the annual deadline, which is April 15. This date aligns with the federal income tax filing deadline. It is important to note that not receiving a tax form in the mail does not excuse a filer from the obligation to file and pay on time. Failure to meet the deadline can result in the assessment of interest and penalties on the unpaid balance.

For those who prefer to file a paper return, the completed and signed form must be mailed. If a payment is due, you must first go to the Philadelphia Tax Center website to print a personalized payment voucher. This voucher must be mailed with your completed tax return and your check or money order. The mailing address for SIT returns is a specific P.O. Box designated by the Philadelphia Department of Revenue, and it is advisable to check the city’s website for the most current address to avoid processing delays.

The City of Philadelphia also offers modern, convenient methods for filing and payment. You can file your return and make a payment electronically through the Philadelphia Tax Center website. To use this system, you may need to create an account, a process that can take some time to complete, so it is best not to wait until the deadline.