Can You Claim Pennsylvania School Tax on Your Federal Tax Return?

Pennsylvania property owners pay their school taxes as a property tax. This makes the school tax a legitimate deduction on Pennsylvania residents’ federal income tax returns, just as real estate property taxes are deductible. To claim the deduction, taxpayers need to itemize their deductions. The tax amount is recorded on Form 1040 Schedule A as a real estate tax.

Pennsylvania uses a millage rate to calculate its property taxes. The school district in which the taxpayer’s property is located will have its assessed value multiplied by the millage rate for the school district to come up with the school tax. One mill equals 1/1000th of a dollar. If your property is worth $200,000 and the rate is 3 mills, you would divide $200,000/1,000 and multiply by 3 to get a tax owed of $600.

Pennsylvania does not tax real estate or personal property at a state level. Real estate and personal property taxation is left to counties, municipalities and school districts. Typically, counties, municipalities and school districts all assess these taxes, so your property tax is actually the sum of all three millage rates. For example, if you live in the borough of Media, Pennsylvania, in the Rose Tree Media school district, you are also in Delaware County and will have to pay school taxes to Media, Rose Tree and Delaware County. For 2018, your total millage is 33.6985, as you will pay 5.6040 for Delaware County; 3.0000 for Media and 25.0945 for the school district.

Pennsylvania law prohibits a millage rate in excess of 30 mills on the assessed value unless the courts grant special permission.

For the school tax to be considered a deductible real estate tax, it must be for a non-business property and based on the assessed value of the property. All of the properties in the neighborhood must have also undergone the same uniform assessment process. The proceeds from taxes must also be used by general community or governmental purposes. Under these IRS conditions, the school tax qualifies.

Since taxes can become burdensome, particularly on someone who has lived in a property for a long time and seen it increase in value, there is the Taxpayer Relief Act. This allows school districts to add earned income and net profits taxes or a personal income tax in order to lower a property owner’s property tax. This works well for senior citizens who have less income, in general, while their homes may have increased in value. By shifting some of the tax to an income tax, it lowers their tax burden.