What Is a Total Resident EIT Rate and How Is It Determined?
Uncover the specifics of your local earned income tax. Understand the total resident EIT rate, how it's comprised, and how to determine your precise obligation.
Earned Income Tax (EIT) represents a type of local taxation applied to an individual’s earnings, distinct from federal or state income taxes. The “total resident EIT rate” refers to the combined local EIT rate that applies to individuals living within a specific taxing jurisdiction. These rates are not uniform and can differ considerably depending on a taxpayer’s location.
What is Earned Income Tax
Earned Income Tax (EIT) is a levy typically imposed by local government entities, such as municipalities, townships, or school districts, on specific types of income. This tax aims to fund local services and community needs.
Income considered “earned income” for EIT purposes generally includes wages, salaries, commissions, bonuses, and net profits derived from businesses, professions, or other active income-generating activities. This encompasses compensation received for services rendered, whether in cash or property.
Conversely, various income types are usually not subject to EIT. These commonly include passive income sources like interest, dividends, and capital gains. Additionally, unemployment compensation, pension payments, Social Security benefits, and disability payments are typically exempt from EIT.
Determining Residency for EIT
Residency plays a significant role in determining an individual’s total resident EIT rate. Generally, being a “resident” for EIT purposes means maintaining a domicile or a permanent place of abode within a specific local taxing jurisdiction.
This typically refers to the place where an individual lives for the majority of the year or where their primary home is established. While residency rules can exhibit minor variations across different local ordinances, they consistently focus on the taxpayer’s established home.
This resident status determines which local EIT rates apply to an individual’s earned income.
Components of the Total Resident EIT Rate
The “total resident EIT rate” is frequently a composite rate. In many areas, this combined rate includes both a municipal EIT rate and a school district EIT rate.
Each local entity, such as a city, borough, township, or school district, independently establishes its own EIT rate. For example, if a municipality levies a 0.5% EIT and the local school district levies an additional 1.0%, the total resident EIT rate for individuals residing in that area would be 1.5%.
How to Find Your Specific Total Resident EIT Rate
Identifying your specific total resident EIT rate requires checking information from local government sources. A primary resource is the official website of your local municipality, whether it is a city, borough, or township, and your local school district. These websites often provide details on local tax rates applicable to residents.
State government resources can also be helpful. Some state departments of community and economic development offer online lookup tools where individuals can search for EIT rates by address. Local tax collection agencies or their dedicated websites also serve as reliable sources for this information. Additionally, a taxpayer’s pay stub may indicate the local EIT rate if the tax is being withheld by an employer.
How Resident EIT is Paid
The total resident EIT is typically paid through established procedural methods. For most employees, the EIT is withheld directly from their paychecks by their employer. Employers are responsible for remitting these withheld funds to the appropriate local tax collector.
Individuals with earned income not subject to employer withholding, such as self-employed individuals or those with net profits from a business, are generally required to make estimated tax payments throughout the year. These estimated payments are typically made quarterly to the local tax collector to ensure tax obligations are met as income is earned.
Regardless of whether taxes are paid through withholding or estimated payments, an annual local earned income tax return is usually required. This annual filing allows taxpayers to reconcile their actual income for the year with the total EIT paid, ensuring accurate compliance with local tax requirements.