The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: luzluz on February 12, 2015, 08:14:16 PM
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Philadelphia has a School Income Tax. It's a 4% tax on dividends reportable to the state (i.e. not in taxable account), on any capital gains for property held longer than 6 months regardless of location, rental income, etc. Since it's the city taxing it, there aren't the bi-state agreements on out of state taxes.
Is it crazy when going for FI with taxable accounts and rental properties (which are out of state so pay other state taxes as well) to live in a places that taxes all income even outside of the city?
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Depends...how steep are your property, sales, and other local taxes?
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Depends...how steep are your property, sales, and other local taxes?
I guess and I get that in the end it's a cost benefit for how much I like living in the place.
But a property tax is just a cost of having the home. The sales tax is just related to the prices of the goods. It just seems bizarre to me that I'm getting taxed by a city--more or less--on my net worth. It's almost like a 0.04% expense ratio (assume I get 10% returns).
Thanks both. I feel a bit better. I just need to calculate it out, I guess.
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Hate to break it to you, but rental income is typically subject to BIRT and NPT, not SIT.
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Hate to break it to you, but rental income is typically subject to BIRT and NPT, not SIT.
Out-of-city/state rental income from an LLC.
Calculating it out PA+Philly taxes on this would be 6.99%. That's not too out of line with other states with higher income taxes especially combined with local income taxes (which would often cover dividends, gains, etc.)
My two biggest worries were:
1) Being taxed twice on it. Paying Philly tax and that higher out-of-state tax. That pushes up the number from 6.99% to over 10% if I'm paying full other state and local taxes and Philly taxes. (Reciprocity would wipe out any PA liability).
2) Filing Philadelphia taxes. The other state where I've had to deal with local taxes, they were just an add on percentage to your state return so there was no confusion about what to include. In Philly, half the people don't file, there's little enforcement, and the regulations aren't clear to me on some of the issues.
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You're certainly not getting much for your money. What keeps you in Philadelphia?
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You're certainly not getting much for your money. What keeps you in Philadelphia?
It's a great place to walk and bike. We both live less than a mile from where we work at jobs we like. We can walk a mile or two and take advantage of any number of museums (often free on Sundays or holidays). It really is a great place to live, generally.