Pertinent State and Local Tax News

In January 1, 2017, there will be a small increase in Philadelphia’s real estate transfer tax from 3% to 3.1%. When added to the Pennsylvania Realty Transfer Tax, this will increase the overall transfer tax to 4.1%. We believe that this will result in the highest total transfer tax of any locality in the Commonwealth: but only by a slim margin—a transfer in the city of Pittsburgh would, between state, city and school district, be assessed at 4%.

The Pennsylvania/New Jersey Income Tax Reciprocity Agreement that was established in 1977 will stay in place. This compact allowed commuters between Pennsylvania and New Jersey to pay tax in the state where they live rather than the state where they work. By way of background, New Jersey has a graduated income tax that tops out at 8.97%; Pennsylvania has a flat rate of 3.07%. In an effort to address state budget problems and perhaps sensing that the compact allowed too many high earning Pennsylvania resident commuters to skip out on paying higher New Jersey taxes, New Jersey Governor Chris Christie announced an end to the tax compact in September of this year. (For many if not most PA-NJ commuting taxpayers this would have required filing returns in both states to allocate income to the state of its source.) In November, Governor Christie announced that New Jersey would no longer pursue the termination of the compact.

Pennsylvania has announced a tax amnesty period from April 21, 2017 through June 19, 2017. During this 60 day period Pennsylvania individuals or business with various kinds of unpaid taxes, underpaid taxes, or unfiled returns as of December 31, 2015, will be able to fulfill their obligations without paying penalties and by paying only half the interest they would otherwise pay. Taxes within the scope of the amnesty include personal income tax, Inheritance Tax, sales and use tax and corporate income tax.

– Rod Fluck

Posted in Finance / Taxes, Newsletters