How do I determine the taxable amount of distributions from IRC Section 529 Qualified Tuition Account programs?

Only include amounts received from your 529 plan that were NOT used for qualified tuition and fees. For example, amounts used to pay for room and board do not count as qualified fees and should be entered here.

You can find more information on the Pennsylvania Department of Revenuewebsite for how to determine the taxable portion of any distributions for non-educational purposes.

Do I owe taxes on distributions from life insurance, annuity, or endowment contracts?

If you invested in an annuity, including a retirement annuity that isn't part of an employer-sponsored retirement program, you may have Pennsylvania taxable income when you begin receiving annuity payments.

If you're required to report an amount from an annuity for federal income tax purposes, you're required to report the amount as interest income for Pennsylvania income tax purposes. Also, if you're required to report an amount from a life insurance and endowment contract for federal income tax purposes, you're required to report the amount as interest income for Pennsylvania income tax purposes.

Do I owe taxes on distributions from charitable gift annuities?

If you established a gift annuity to a charitable organization from which you're receiving periodic payments, you need to enter the amount here as Pennsylvania taxable interest income.

You need to report the same charitable gift annuity income on your Pennsylvania return that you reported for federal income tax purposes, regardless of when you began reporting the income from that charitable gift annuity.

If a charitable gift annuity is exchanged or sold in the future, the Pennsylvania basis in the annuity will be different from the federal basis if payments began prior to January 1, 2005.

Should I report Gambling and Lottery Winnings?

For Pennsylvania residents, all gambling and lottery winnings from any source, except prizes from playing the Pennsylvania State Lottery, are taxable on your Pennsylvania return. As a resident, you must include lottery winnings from other states and countries.

For nonresidents, all gambling and lottery winnings from Pennsylvania sources, except prizes from playing the Pennsylvania State Lottery, are taxable on your return.

Gambling and lottery winnings include cash, the value of property (automobiles, jewelry, electronic devices, appliances, clothes, etc.), the value of the use of property (trips, vacations, airline tickets, cruises, etc.), and other items of value. You may only deduct your costs of gambling, wagering, betting, and playing lotteries from your winnings. You may not deduct any expenses (programs, tip sheets, travel, meals, lodging, etc.) that you incurred to take part in gambling, wagering, betting, and lottery activities.

Important: You may not deduct the cost of Pennsylvania State Lottery tickets from other taxable gambling and lottery winnings.

For more information, see the PA-40 instructions.

Do I need to report Partnership Distributions?

Report any gain you realized from other partnership distributions that exceed your ownership basis in the partnership. You must obtain, complete and submit Form REV-999, Partner PA Outside Tax Basis in a Partnership Worksheet.

Do I need to report Pennsylvania S Corporation Distributions?

Report any gain you realized from other Pennsylvania S corporation distributions that exceed your ownership basis in the Pennsylvania S corporation. You must obtain, complete and submit Form REV-998, Shareholder Tax Basis in PA S Corporation Stock Worksheet.

Should I report Gains from Exchange of Insurance Contracts?

If you have a sale, exchange, or disposition of an insurance contract that doesn't qualify as tax exempt under IRC Section 1035, report the taxable exchange of any insurance contracts you reported for federal income tax purposes. If you have more than one taxable exchange of contracts, report the total gain you realized.

The following exchanges are tax-exempt under IRC Section 1035, so you shouldn't report them on your Pennsylvania return:
  • An exchange of a life insurance contract for another life insurance contract, an endowment contract, or an annuity contract;
  • An exchange of an annuity contract for another annuity contract;
  • An exchange of an endowment contract for an annuity contract; and
  • An exchange of one endowment contract for another endowment contract if the dates for payments begin on or before the original contract's payment dates.

What is tax forgiveness?

The Tax Forgiveness Credit allows eligible taxpayers to reduce all or part of their Pennsylvania tax liability. Tax forgiveness gives a state tax refund to some taxpayers and forgives some taxpayers of their liabilities even if they haven't paid their Pennsylvania income tax.

Am I eligible for tax forgiveness?

You, and your spouse if applicable, are eligible if all of the following apply:
  1. You're subject to Pennsylvania personal income tax. You and/or your spouse are liable for Pennsylvania tax on your income (or would be liable if you earned, received, or realized Pennsylvania taxable income).
  2. You aren't a dependent on another person's federal tax return.
  3. Your total eligibility income (which includes some nontaxable income) is below certain thresholds for your filing status.

NOTE: A dependent child may be eligible if he or she is a dependent on the Pennsylvania Schedule SP of his or her parents, grandparents, or foster parents. For more information, see the PA-40 instructions.

How are contributions to the Wild Resource Conservation Fund used?

Contributions to this nonprofit fund help Pennsylvania's resource agencies protect and restore Pennsylvania's non-game wildlife and native wild plants.

You can also send a direct, tax-deductible contribution to:

Wild Resource Conservation Fund
PO Box 8552
Harrisburg, PA 17105-8552

For more information, visit: www.dcnr.state.pa.us/wrcp/.

How are contributions to the Military Family Relief Assistance Program used?

Contributions to this fund help Pennsylvania service members and their families by providing financial assistance to those with a direct and immediate financial need as a result of military service.

You can also send a direct, tax-deductible gift to:

Military Family Relief Assistance Program
c/o Department of Military and Veterans Affairs
Fort Indiantown Gap
Annville, PA 17003-5002

For more information visit: www.dmva.state.pa.us or call toll free 1-866-292-7201.

How are contributions to the Memorial Organ and Tissue Donation Awareness Trust Fund used?

Money from this fund will support educational programs that encourage people to become organ and tissue donors.

You can also send a direct contribution. Make your check or money order payable to:

Governor Robert P. Casey Memorial Trust Fund
Mail to:
Department of Health
Bureau of Administrative and Financial Services
Division of Budget
625 Forster Street
Health & Welfare Building, Room 832
Harrisburg, PA 17120

How are contributions to the Juvenile Diabetes Cure Research Fund used?

Contributions to this fund are used to help find a cure for Type 1 diabetes.

You can also send a direct contribution. Make your check or money order payable to:

Juvenile (Type 1) Diabetes Cure Research Fund
Mail to:
PA Department of Health
Bureau of Administrative and Financial Services
Division of Budget
625 Forster Street
Health and Welfare Building, Room 832
Harrisburg, PA 17120

How are contributions to the Breast and Cervical Cancer Research Fund used?

Contributions are used to fund breast and cervical cancer research conducted by Pennsylvania researchers.

You can also send a direct contribution. Make your check or money order payable to:
PBCC's Refunds for Research fund
c/o PA Breast Cancer Coalition
2397 Quentin Road, Suite B
Lebanon, PA 17042

For more information, visit: www.pabreastcancer.org/ or call 1-800-377-8828.

Are my employer-sponsored retirement plan distributions taxable?

Pennsylvania doesn't tax payments you receive that are commonly recognized retirement benefits from eligible employer-sponsored retirement plans.

Eligible employer-sponsored retirement plans can, but don't necessarily, include employer-sponsored deferred compensation plans, pension or profit sharing plans, 401(k) plans, thrift plans, thrift savings plans, or employee welfare plans.

Ask your employer or plan administrator if your employer's retirement plan is an eligible plan for Pennsylvania income tax purposes. Eligible nonemployer-sponsored retirement plans can, but don't necessarily, include Individual Retirement Accounts (IRAs) or Roth IRAs.

Are withdrawals from Individual Retirement Accounts (IRAs) taxable?

Distributions from an IRA, including a federal Roth IRA, are taxable to the extent the distribution exceeds your previously taxed contributions. Distributions you receive after retiring but before age 59 1/2 are taxable even if you receive substantially equal payments and you don't pay the federal penalty for an early withdrawal. Pennsylvania law doesn't have any exceptions similar to the federal exceptions for withdrawal before age 59 1/2. However, distributions from an IRA aren't taxable if one or both of the following is true:
  1. The payments are received, including lump sum distributions, on or after age 59 1/2.
  2. The payments are paid to the estate or designated beneficiary of the participant because of the participant's death.

Is a rollover of a pension or IRA distribution taxable?

If you roll over your retirement account distribution or IRA distribution into another qualified fund, the distribution isn't taxable for Pennsylvania purposes.

What are Code 1 & 2 Early Distributions?

If Box 7 of your 1099-R shows a 1 or 2 in it, that distribution is taxable for Pennsylvania purposes unless both of the following are true:

  1. Your pension or retirement plan was an eligible plan for Pennsylvania tax purposes.
  2. You retired after meeting the age conditions of the plan or years of service conditions of the plan.

If your plan wasn't an eligible plan, or you haven't reached the age or years of service required under the plan to retire, you must determine the Pennsylvania taxable amount of your distribution.

What is a Code 3 or 4 Death or Disability Distribution?

If Box 7 of your 1099-R shows a 3 or 4 in it, this is a distribution due to death or disability. A distribution due to death isn't taxable for Pennsylvania purposes. A distribution due to disability generally isn't taxable for Pennsylvania purposes.

What is a Code 7 Normal Distribution?

If Box 7 of your 1099-R shows a 7 in it, this distribution isn't taxable if you met the plan requirements (the age and/or years of service required by the plan) for retirement, and you retired after meeting those requirements.

CAUTION: If the distribution is from an annuity, it may be taxable. See the PA-40 form instructions.

What union dues are deductible?

Union dues, assessments, and initiation fees are allowable business expenses if one or both of the following is true:

  1. The payments are a condition of continued membership in a union, and membership is related directly to your present job.
  2. The payments are a required wage deduction under an agency shop agreement.

What work clothes or uniforms are deductible?

The costs of purchasing and maintaining uniforms and work clothing to protect you from bodily injury are allowable business expenses if both of the following apply:

  1. The uniforms and clothing are of a type specifically required by the employer to be purchased as a condition of continued employment.
  2. The uniforms and clothing aren't adaptable to general usage.

What small tools and supplies are deductible?

Expenses for small tools and supplies that your employer doesn't provide are allowable business expenses if you must have those tools and supplies to perform the duties of your job.

What license or insurance fees are deductible?

Trade, professional, or occupational licenses or fees required as a condition of employment are allowable business expenses. Include malpractice insurance and fidelity bond premiums where required by law or by your employer.

What are parking fees, overnight expense, and meals and entertainment?

Enter the same amounts for parking fees, travel expenses away from home, and meals and entertainment expense as you would enter on federal Form 2106. See the federal Form 2106 instructions for the rules for deducting these expenses. However, meals and entertainment expenses are 100 percent deductible for Pennsylvania, whereas they are only 50 percent deductible on the federal Form 2106.

Meals while not in overnight traveling status (e.g. meals while working late) and federal per diem rates for meals and incidental expenses are not allowable.

What are miscellaneous expenses?

Include any expenses that you would report on your federal Form 2106, such as business gifts. See the federal Form 2106 instructions for more details on deductible miscellaneous expenses.

How can I find out my school district code?

If your school district isn't listed, and you don't know your code, you can find it listed in the Pennsylvania list of school district codes.

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