Question about PA State Income Tax (Philadelphia: sales, mortgage, credit)

[Sassygirl18]

I know the state income tax rate is 3.07, but this is my question: are you taxed on your entire income, or on your adjusted income, POST-deductions?

Thanks!

[BPP1999]

PA does not start with Federal income. PA has very few deductions. To answer your question, you are taxed on your PA income, which is made up of PA wages (usually similar to Medicare wages), PA interest, PA dividends, etc. There are no deductions in PA for things like mortgage interest, taxes paid, charity, etc.

[Sassygirl18]

OUCH!

Thanks for the answer (I think

[BPP1999]

The thing is, with a low, flat rate, PA is considered (from a personal income tax perspective) a low-tax state.

[Sassygirl18]

Yes, but I am also taking the Phila. wage tax into consideration in figuring out total tax.

[armx]

That is why you should not settle for the same pay as in Delaware or NJ. Every job in Philly must pay at least 10% more to be of same value anywhere else.

[Tracysherm]

Wait, you live in NJ? You should not pay any PA income tax. You pay the Phila wage tax and may or may not have to pay NJ income tax.

Unless they changed in the past 5 years, this is how it was for me when I lived in NJ and worked in Philly:

I paid Phila wage tax, and since that was more than the amount I'd pay for NJ income tax, I was exempt from the NJ tax.

The packet I have says
"For example, where the Philadelphia Wage tax is greater than the New Jersey income tax otherwise required to be withheld, there would be no withholdings for New Jersey income tax purposes if:
(1) the Phildelphia Wage Tax is withheld fromt he employee's wages, and
(2) the person is solely employed within the city of Philadelphia.

I will look up the citation for the actual law. This is just a packet I used to give to the payroll dept where I used to work to remind them to not take out State tax. The packet is from the State of NJ Division of Taxation "NJ-WT January 1, 1991 -NJ Gross Income Tax: Instructions for Employers."


Addendum-
Found a citation: See the bottom right of Page 2
http://www.docstoc.com/docs/766762/2...oss-Income-Tax

[phlydude]

I live in DE and work in PA - I pay PA wage tax and would get PA unemployment if that were to happen.
I fill out the PA income tax forms at tax time and it all breaks even - then, I use the tax paid to PA as a credit towards tax due Delaware (which is now 6.95% on income 60k or over - but we don't have sales tax...heh)

[toby2]

Originally Posted by BPP1999

PA does not start with Federal income. PA has very few deductions. To answer your question, you are taxed on your PA income, which is made up of PA wages (usually similar to Medicare wages), PA interest, PA dividends, etc. There are no deductions in PA for things like mortgage interest, taxes paid, charity, etc.

Wait, so are you saying that when you file your tax return you cannot deduct any mortgage interest you paid in the previous year?

[phlydude]

PA is a flat tax rate - what you pay in your wages should balance out when it comes to tax filing (aside from any dividend income you may have causing you to owe more).

Work expenses can be deducted but no personal exemptions aside from what the state gives you - no mortgage interest, no sales tax interest.

Mortgage interest gets deducted on Federal return