Pennsylvania’s budget bill, Act 13 of 2019 (H.B. 262), signed by Gov. Tom Wolf June 28, made a number of significant changes to Pennsylvania’s tax laws—some of which are already effective and others that do not take effect until 2020. This article will discuss the top four changes impacting taxpayers.

Personal Income Tax Benefits for Investors

Those taxpayers who were excited to learn of the income tax advantages associated with investments related to the federal Qualified Opportunity Zone (federal QOZ) program will be equally happy to hear of Act 13’s change to the personal income tax (PIT). Unlike many other states, Pennsylvania’s PIT base does not start with federal taxable income, but instead is imposed upon seven specified categories of income. Therefore, prior to Act 13, PIT taxpayers taking advantage of the QOZ program would have been subject to PIT on their gains that are deferred and excluded for federal income tax purposes. Thankfully, Act 13 alters the law to address this issue. Effective for tax years beginning after Dec. 31, 2019, Act 13 grants taxpayers QOZ benefits for PIT purposes by clarifying that “net gains,” “net losses” and “dividends” do not include any amounts of gain, loss or income that are excluded from federal taxation pursuant to the federal QOZ rules. Thus, taxpayers will receive all of the exclusions and deferrals offered for federal income tax purposes pursuant to the federal QOZ program.

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