Through Tax Forgiveness, eligible working families who paid income tax throughout the year may be refunded some or all of that tax paid. Retired persons and low-income individuals who did not have PA income tax withheld from earnings may have PA income tax liabilities forgiven.
To receive Tax Forgiveness, a taxpayer must file a PA personal income tax return (PA-40) and complete Schedule SP
How do I know if I qualify for Tax Forgiveness?
First, calculate eligibility income, which differs from taxable income. Not only do you include the income you report on your PA tax return, but you also include other non-taxable income, such as:
•Interest, dividends and gains exempt from PA tax. For example, interest received from cashing U.S. savings bonds.
•Alimony and spousal support.
•Child support (included in child’s eligibility income, not the parent’s eligibility income).
•Income received while a non-resident of Pennsylvania.
•Insurance payments or the value of an inheritance including distribution code 4 payments reported on federal form 1099-R.
•Gifts, awards and prizes received in recognition of civic and social achievements, or winnings from the PA Lottery
•Military pay not reported as income on your PA tax return. This does not include combat pay or hazardous duty pay.
•The value of a scholarship, stipend or fellowship you received that is not taxable.
•Other cash payments received from people living outside your household. For example, personal support from a former spouse, foster care payments or gifts from grown children.
Certain income does not have to be included in eligibility income, such as: Social Security, unemployment and pension payments.