Ask/Answered is a weekly feature for reader-submitted questions. Follow the blog online at www.cumberlink.com:
Why does my Middlesex Township job deduct payroll taxes for Carlisle, where I live?
If you’ve ever looked at your pay stub, you know that the money you get is a lot less than what you actually earn.
Most people are familiar with the largest payroll deductions, such as Social Security and federal and state income taxes. But what about the other assorted acronyms that chip away at your take-home pay? One reader had a question about the taxes that accrue when you live in one town but work in another.
Like the federal and state governments, local governments in Pennsylvania charge an earned income tax. Carlisle’s combined borough and school district rate, for example, is 1.6 percent.
If you live in a different municipality from your workplace, it’s your home town that typically receives the money from your paycheck, according to the Pennsylvania Department of Community and Economic Development. One rare exception to the rule occurs if the town in which you work charges a higher tax rate than your home town. In that case, the workplace municipality will receive the difference between the two rates. Your employer should deduct whichever town’s rate is higher.
The municipality where you are employed can also take a bit of your paycheck through the local services tax, a flat rate that must be used to support emergency services, road construction or homestead and farmstead property tax relief. The maximum a town can charge for the local services tax is $52 per year, and many Cumberland County municipalities charge the maximum rate.
That fee must be deducted on a prorated basis, according to DCED; for example, if you get paid 26 times per year (every two weeks), the employer would deduct $2 per paycheck to reach the $52 maximum annual rate.
Still confused? Here’s an example of how a person who lives in Carlisle but works in Middlesex Township would be taxed.
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Carlisle Borough deducts a 0.5 percent income tax on residents and Carlisle Area School District deducts a 1.1 percent income tax. The person would also have to pay a $52 local services tax for working in Middlesex Township.
In total, the employee pays 1.6 percent per paycheck plus $52 annually.
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