Pennsylvania PA Schedule SP - Special Tax Forgiveness

PA Schedule SP - Special Tax Forgiveness
2023 PA Schedule SP - Special Tax Forgiveness (Form and Instructions) (PA-40 SP)
IMPORTANT: FILL IN FORM MUST BE DOWNLOADED ONTO YOUR COMPUTER PRIOR TO COMPLETING
2309510051

PA SCHEDULE SP
Special Tax Forgiveness

2023

PA-40 SP (EX) MOD 03-23 (FI)
PA Department of Revenue

START

OFFICIAL USE ONLY

Name (if filing jointly, use name shown first on the PA-40)

Social Security Number (shown first)

Spouse’s Name (even if filing separately)

Spouse’s Social Security Number

➜

Eligibility Questions
1. Are you a dependent on another taxpayer’s (parent, guardian, step-parent, etc.) federal tax return?
Yes
No
2. If you answered “Yes” above, does the taxpayer on whose return you are a dependent qualify for tax forgiveness?
Yes
No
IMPORTANT: If you answered “No” to Question 1, please proceed with completing Schedule SP. If you answered “Yes” to Question 1, you must also have answered
“Yes” to Question 2 to be eligible for tax forgiveness and complete Line 1b. or Line 3c. from Section I below.

FILING STATUS FOR TAX FORGIVENESS

SECTION I
1.
a.
b.

Unmarried - use Column A to calculate your Eligibility Income. Fill in the Unmarried oval on Line 19a of your PA-40. Fill in the oval that describes your situation:
Single. Unmarried/divorced on Dec. 31, 2023
Single and claimed as a dependent on another person’s PA Schedule SP. Enter the other person’s:
SSN:

2.

Name:

Separated – use Column A to calculate your Eligibility Income.
Fill in this oval only if (a) you are separated pursuant to a written agreement or (b) you were married, but separated and lived apart for the last six
months of the year. Fill in the Unmarried oval on Line 19a of your PA-40.
Married - Fill in the Married oval on Line 19a of your PA-40. Enter your spouse’s name and SSN above. Fill in the oval that describes your situation:
a.
Married and claiming Tax Forgiveness together with my spouse. Use Column A to calculate Eligibility Income.

3.

b.

Married and filing separate PA tax returns.
Certification. Fill in this oval certifying that you and your spouse are submitting the same
information on each PA Schedule SP. Use Columns B and C to calculate your Eligibility Income.

c.

Married with a spouse who is a dependent on another person’s PA Schedule SP or federal income tax return. Use Columns B and C to calculate
Eligibility Income. Enter the other person’s:
SSN:

d.
4.

Name:

Separated and lived apart from my spouse but for less than the last six months of the year. Use Columns B and C to calculate Eligibility Income.
Enter your spouse’s name and SSN above.
Deceased - use Column A to calculate your Eligibility Income.
Fill in the Deceased oval on Line 19a of the PA-40. You must annualize the decedent’s income (see the instructions) and briefly describe your method:

SECTION II

DEPENDENT CHILDREN

Provide all the information for each dependent child. If more than nine dependent children, submit additional schedules as needed.
1.

DEPENDENT’S NAME

AGE

RELATIONSHIP

SOCIAL SECURITY NO.

IMPORTANT: Only claim the child or children that you
claimed as your dependent(s) on your 2023 Federal
Income Tax return.

2. Number of dependent children.
Enter on Line 19b of your PA-40. . . . . 2.

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2309610059

PA-40 SP (EX) MOD 03-23 (FI)

Taxpayer’s Social Security Number

Taxypayer’s Name:

SECTION III

ELIGIBILITY INCOME

Married taxpayers filing jointly use Column A and Eligibility Income
Table 2. Single filers, qualifying separated filers, and if filing for
a decedent use Column A and Eligibility Income Table 1.
COLUMN A
UNMARRIED OR MARRIED
FILING JOINTLY

Married taxpayers filing separately, and taxpayers separated but not for the last
six months of the year use Columns B and C, and Eligibility Income Table 2.
MARRIED FILING SEPARATELY

The Eligibility Income Tables are on page 39 of the PA-40 booklet.

COLUMN B
TAXPAYER

1.

PA taxable income from Line 9 of your PA-40

1.

2.

Nontaxable interest, dividends and gains and/or annualized income

2.

3.

Alimony

3.

4.

Insurance proceeds and inheritances

4.

5.
6.
7.
8.

Gifts, awards and prizes
Non-PA income – part-year residents and nonresidents
Nontaxable military income – Do not include combat pay
Gain excluded from the sale of a residence

5.
6.
7.
8.

9.

Nontaxable educational assistance

9.

10.
11.

Foster care and cash received for personal purposes
10.
ÁTotal Eligibility Income for Column A
Total Eligibility Income for Columns B and C – add Lines 1 through 10 for each spouse and enter the total Ë

SECTION IV

COLUMN C
SPOUSE

11.

CALCULATING YOUR TAX FORGIVENESS CREDIT

12.

PA Tax Liability from your PA-40, Line 12 (if amended return, see instructions)

12.

13.
14.
15.

Less Resident Credit from your PA-40, Line 22
Net PA Tax Liability. Subtract Line 13 from Line 12
Percentage of Tax Forgiveness entered as a decimal from the Eligibility Income Table
using your dependents from Section II and your Total Eligibility Income from Line 11
Tax Forgiveness Credit. Multiply Line 14 by the decimal on Line 15.
Enter on your PA-40, Line 21.

13.
14.
15.

16.

%

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2023
Instructions for PA-40 Schedule SP

Special Tax Forgiveness

PA-40 SP IN 03-23

GENERAL INFORMATION

GENERAL INSTRUCTIONS

PURPOSE OF SCHEDULE
Use PA-40 Schedule SP to claim the Tax Forgiveness Credit
for taxpayers who meet the qualifications to reduce all or a
part of their Pennsylvania Tax Liability.

WHAT IS TAX FORGIVENESS?
Tax Forgiveness is a credit that allows eligible taxpayers to
reduce all or part of their PA tax liability. Tax Forgiveness:
● Gives a state tax refund to some taxpayers; and
● Forgives some taxpayers of their liabilities even if they
have not paid their PA personal income tax.

Refer to the PA Personal Income Tax Guide – Tax Forgiveness section for additional information.

RECORDING DOLLAR AMOUNTS
Show money amounts in whole-dollars only. Eliminate any
amount less than $0.50 and increase any amount that is
$0.50 or more to the next highest dollar.

WHO MUST COMPLETE
PA-40 Schedule SP must be completed and included with
an originally filed PA-40, Personal Income Tax Return, for
any taxpayer(s) claiming the Tax Forgiveness Credit on Line
21 of the PA-40.
An amended PA Schedule SP must be included with Schedule PA-40 X if increases or decreases in income amounts
or changes to any information in Sections I, II or III of PA
Schedule SP are discovered after an original or other
amended return is filed with the department. Section III on
Page 2 of Schedule PA-40 X must be completed to explain
any changes to the information on PA-40 Schedule SP resulting in changes to the Tax Forgiveness credit reported on
an amended PA-40, Personal Income Tax Return.

FORM INSTRUCTIONS
IDENTIFICATION INFORMATION
NAME OF TAXPAYER CLAIMING TAX FORGIVENESS
Enter the name of the taxpayer claiming Tax Forgiveness. If
a jointly filed return, enter the name of the primary taxpayer
(name shown first on the PA-40, Personal Income Tax Return).
SPOUSE’S NAME
Enter the spouse’s name if filing Married, Filing Jointly or
Married, Filing Separately on the PA-40, Personal Income
Tax Return.
SOCIAL SECURITY NUMBER
Enter the Social Security number (SSN) of the taxpayer. If a
jointly filed return, enter the primary taxpayer’s SSN.
SPOUSE’S SOCIAL SECURITY NUMBER
Enter the spouse’s SSN even if filing Married, Filing Separately.
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WHO IS ELIGIBLE FOR TAX FORGIVENESS?
A taxpayer and spouse, if applicable, are eligible if:
1. Subject to PA personal income tax. Taxpayer and
spouse are liable for PA tax on income (or would be liable if earned, received, or realized PA-taxable income);
2. Not a dependent on another person's federal tax return;
and
3. The eligibility income requirements are met.
NOTE: A dependent child may also be eligible if he or
she is a dependent on the PA-40 Schedule SP of his
or her parents, grandparents, or foster parents.
HOW DO I CLAIM TAX FORGIVENESS?
To claim Tax Forgiveness, complete and submit a PA Schedule SP, and:
1. Determine Eligibility Income. If married, whether filing
Married, Filing Jointly or Married, Filing Separately, total
or joint Eligibility Income must be determined in Section
III (taxpayer Eligibility Income plus the spouse’s Eligibility Income).
2. Determine the Filing Status in Section I.
3. Calculate the Tax Forgiveness Credit, using the applicable Eligibility Income Table, in Section IV.
IMPORTANT: There is no advantage to filing separately
because married claimants must report their Joint Eligibility Income on PA Schedule SP. The spouse’s SSN must
be included, even if filing Married, Filing Separately.
CLAIMING DEPENDENTS ON SEPARATE PA
SCHEDULES SP
It is possible that a taxpayer and spouse file jointly for federal income tax purposes, but must file separately for Pennsylvania personal income tax purposes. If qualifying for Tax
Forgiveness, the taxpayer and spouse must each complete
PA-40 Schedule SP as if filing jointly. Each must report the
same information including dependents and the joint Eligibility Income. The Married and Filing Separate ovals in Section I of each PA-40 Schedule SP must be completed. A
copy of the PA-40 Schedule SP must be included with both
PA-40, Personal Income Tax Returns, for the taxpayer and
spouse.
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NONRESIDENTS AND PART-YEAR RESIDENTS
Taxpayers who are nonresidents and part-year residents of
Pennsylvania may claim Tax Forgiveness if meeting all the
eligibility requirements. Such taxpayers must include in their
Eligibility Income all income as described whether earned
within or outside Pennsylvania. Nonresident and part-year
resident taxpayers who file paper copies of the PA-40, Personal Income Tax Return, must also include a copy of pages
one and two of their federal income tax return along with
their completed PA-40 Schedule SP.
CAUTION: Residents of reciprocal states that have
Pennsylvania-taxable income in Pennsylvania classes
of income other than compensation must also include all
their nontaxable income earned outside Pennsylvania, as
well as the compensation not taxable to Pennsylvania as a
resident of a reciprocal state, on Line 6 of PA-40 Schedule
SP.

LINE INSTRUCTIONS
ELIGIBILITY QUESTIONS
LINE 1
Answer the question regarding if the taxpayer is a dependent on another taxpayer’s (parent, guardian, grandparent,
step-parent, etc.) federal tax return.

LINE 2
If yes is the answer on Line 1, answer the question regarding whether the taxpayer on whose tax return the dependency is claimed also qualifies for Tax Forgiveness.
IMPORTANT: If “No” is the answer on Line 1, proceed
with completing the remaining section of PA-40 Schedule SP to determine eligibility for Tax Forgiveness. If “Yes”
is the answer on Line 1 and Line 2, proceed with completing
the remaining sections of PA-40 Schedule SP to determine
eligibility for Tax Forgiveness. If “Yes” is the answer on Line
1 and “No” is the answer on Line 2, Tax Forgiveness may
not be claimed.

SECTION I
FILING STATUS
Fill in the oval(s) that accurately describe(s) the filing status
as of Dec. 31 of the tax year.

LINE 1

LINE 1B
Complete this oval claimed as a dependent on another person’s PA-40 Schedule SP. Enter the other person’s SSN and
name in the spaces provided.
STUDENTS
A full-time student who is a dependent on his/her parents’
federal income tax return cannot claim this credit, regardless
of his/her income, unless his/her parents are eligible for Tax
Forgiveness. In this case, the student claimant must file
his/her own tax return and PA-40 Schedule SP.

LINE 2
Complete the separated oval on PA-40 Schedule SP only if
separated and living apart at all times during the last six
months of the tax year, or separated pursuant to a written separation agreement. Also complete the unmarried/separated
oval on Line 19a of the PA-40, Personal Income Tax Return.

LINE 3
Complete the married oval on PA-40 Schedule SP if married
and living together or a joint return was elected to be filed in
the year of death of the taxpayer and/or spouse. Also complete the married oval if filing married and living apart for
less than the last six months of the tax year or were separated, but not by a written separation agreement. In addition,
complete the married oval on Line 19a of the PA-40, Personal Income Tax Return.
LINE 3A
Complete this oval if married and living together or a joint
return was elected to be filed in the year of death of the taxpayer and/or spouse.
LINE 3B
Complete this oval if married and filing separate PA-40, Personal Income Tax Returns.
NOTE: Columns B and C must be completed in Section III, Eligibility Income.
CERTIFICATION
Complete this oval if certifying the information included on
each Schedule SP is the same.
LINE 3C
Complete this oval if married and the spouse is dependent
on another person’s federal tax return. Enter the other person’s SSN and name in the spaces provided.
NOTE: Columns B and C must be completed in Section III, Eligibility Income.

Complete the unmarried oval on PA-40 Schedule SP if single, widowed and could not or did not elect to file a joint return in the year of death of the taxpayer and/or spouse, or
divorced on Dec. 31 of the tax year. Also complete the unmarried/separated oval on Line 19a of the PA-40, Personal
Income Tax Return.

LINE 3D
Complete this oval if married and lived apart but not for the
last six months of the tax year.

LINE 1A
Complete this oval if single, unmarried, divorced or widowed
and could not or did not elect to file a joint return in the year
of death of the taxpayer and/or spouse.

When claiming Tax Forgiveness together, either the taxpayer or spouse must meet the eligibility requirements, but
the Joint Eligibility Income and Eligibility Income Table 2
must be used.

2

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NOTE: Columns B and C must be completed in Section III, Eligibility Income.

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When filing separately, the taxpayer and spouse must combine their Eligibility Incomes to determine if they meet the
eligibility requirements. A married taxpayer cannot claim Tax
Forgiveness independently of his or her spouse. Married
claimants are not dependents of one another for Tax Forgiveness purposes, even when one spouse does not have
any Eligibility Income. Each must use the Joint Eligibility Income and Eligibility Income Table 2, and fill in the oval and
certify that the same information for PA-40 Schedule SP is
being used.
When one spouse is claimed as a dependent on another
person’s federal income tax return, otherwise qualifying married taxpayers must file separately.
EXAMPLE: Scott is a dependent on his parents’ federal income tax return and is not eligible for Tax Forgiveness. His
wife, Paula, is not a dependent, and may complete PA-40
Schedule SP. Paula may not claim Scott as a dependent,
but must include his Eligibility Income when calculating her
Total Eligibility Income. Additionally, if Scott’s parents qualify
for Tax Forgiveness, Scott may also qualify if he included
Paula’s income in his Total Eligibility Income.

LINE 4
Complete this oval if the tax return is being filed for a person
who died during the tax year and/or the deceased person’s
surviving spouse or deceased spouse could not or did not
elect to file a joint return with the deceased taxpayer. Annualization of a deceased taxpayer and/or spouse’s income
may be required in order to determine total Eligibility Income
for Tax Forgiveness purposes. Also complete the deceased
oval on Line 19a of the PA-40, Personal Income Tax Return.
ANNUALIZATION OF INCOME
In order to determine eligibility for Tax Forgiveness, the Eligibility Income for a complete year must be used as the tables in Section IV of PA-40 Schedule SP use an annual
income amount in the calculation of the forgiveness factor.
As a result, taxpayers that do not have a complete tax year’s
income (usually deceased taxpayers) must annualize their
income. To annualize a deceased taxpayer’s income, the income realized by the decedent is divided by the number of
days (or months) the decedent lived and multiplied by 365
days (or 12 months) may be used. From this product, subtract the amount of realized income and include the remainder in the amount reported on Line 2 of Section III for PA-40
Schedule SP. One time transactions, such as those from the
sale of stock or real property, need not be included when
determining the amount of the realized income before multiplying by the number of days or months in the tax year.
Realized income includes Pennsylvania-taxable income and
any other eligibility income listed on Lines 2 through 10 for
Section III of PA-40 Schedule SP. Separate calculations of
annualized income amounts may be required for each of the
Lines 2 through 10 in Section III of PA-40 Schedule SP.
When determining the amount of annualized income, the
total Eligibility Income on the prior year’s return may be used
if the individual was eligible for Tax Forgiveness, received
approximately the same income during this taxable year and
did not have any transactions that were different from the
previous tax year. The department will usually accept a reasonable calculation of the decedent’s annual Eligibility Income.
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EXAMPLE: Jerry and Pat have been married for 50 years
and Jerry dies on October 1 of the most recent tax year. Pat
elects to file a joint return with her deceased spouse. Jerry
worked as a custodian for a local school to supplement their
social security income and died while still employed. Jerry
and Pat also had joint interest and dividend income during
the tax year. Jerry’s compensation income must be annualized and the amount Jerry might have earned for the remaining three months of the tax year must be included on
Line 2 in Section III of PA-40 Schedule SP. Because Pat is
electing to file a joint return, the interest and dividend income
from the joint ownership of the assets is not required to be
annualized. If the surviving spouse (Pat) or Jerry’s estate
elects to file a separate return, Jerry’s return would need to
include annualized income from the interest and dividend
classes of income in addition to the annualized compensation income.
IMPORTANT: Surviving spouses should not include
any income in respect of a decedent, income that
should be included on the estate tax return, or any income
of the deceased taxpayer (including the decedent’s half of
any joint income received prior to the decedent’s date of
death) in the taxable income or in the calculation of the Eligibility Income of the surviving spouse when a separate return is filed by the surviving spouse.

SECTION II
DEPENDENT CHILDREN
A dependent child for PA-40 Schedule SP purposes is a
minor or adult child claimed as a dependent on a federal income tax return.
NOTE: If there are no dependents, go to Section III of
PA-40 Schedule SP.
The Department of Revenue has a two-step test for a dependent child:
1. Is the individual a child of the claimant?
For Pennsylvania income tax purposes, a child includes
the natural child, adopted child, or step-child of a parent.
Child also includes a grandchild of a grandparent and a
foster child of a foster parent. Therefore, a son or
daughter, a grandchild, or a foster child can be claimed
as a dependent for PA-40 Schedule SP if the child is
claimed as a dependent on the federal income tax return of the taxpayer. However, an aunt, uncle, or unrelated person cannot claim a child as a dependent, as
defined above, even if claiming the child as a dependent
on a federal income tax return.
2. Can the claimant claim the child as a dependent for
federal tax purposes?
The age, status as a full-time student, and gross income
of a daughter, son, granddaughter, grandson, or foster
child are factors only in determining whether the claimant
can claim the child as a dependent for federal purposes.
For example, parents that can claim a qualifying 30-yearold child for federal purposes can claim that child as a
dependent for PA-40 Schedule SP purposes.
A dependent child cannot be claimed on PA-40 Schedule
SP if:
● The dependent is not a child of the taxpayer, as defined
above;
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● The child cannot be claimed on the federal tax return of
the taxpayer;
● The taxpayer is unmarried for Tax Forgiveness purposes, and the former spouse by agreement or court
decree can claim the child as a dependent for federal
and PA-40 Schedule SP purposes; or
● The child’s other parent, by agreement or court decree,
can claim the child as a dependent for federal tax and
Pennsylvania Tax Forgiveness purposes.

paid to his/her parent on his/her behalf in his/her Eligibility
Income.

Taxpayers filing PA Schedule SP for the first time, or
claiming a new dependent on PA Schedule SP for the
first time on a return where Tax Forgiveness is claimed,
should include copies of the birth certificates and Social Security cards of all the dependents listed on PA Schedule SP,
Section II. For taxpayers with more than four dependent children, the department recommends that all the children included as dependents on PA Schedule SP, Section II, also
be included as dependents for federal income tax purposes
even if no tax benefit for federal tax purposes results from
including them as dependents on the federal return.

LINE 2

No other adult can be claimed as a dependent, even if doing
so on a federal tax return.
A dependent child with taxable income in excess of $33
must file a PA-40, Personal Income Tax Return. If that child’s
parents qualify for Tax Forgiveness, that child is also eligible
for this credit. The child must file a tax return and a PA-40
Schedule SP. The child must also include any child support

LINE 1
Enter the name, age, relationship to the taxpayer and SSN
for each dependent in the spaces provided. If there are more
than nine dependents, include additional PA Schedule SPs
as needed.

Enter the total number of dependent children claimed.
CAUTION: If an adult child, an adopted child, a foster
child, or a child with a different last name from the
taxpayer is claimed on PA-40 Schedule SP, a copy of pages
one and two of the federal income tax return for the tax year
must also be included.

SECTION III
ELIGIBILITY INCOME
Use Column A if unmarried or married filing jointly. Use the
columns under Column B and C if married filing separately.

LINE 1
Enter the total PA Taxable Income amount from Line 9 of the
PA-40, Personal Income Tax Return.

ELIGIBILITY INCOME TABLE 1. Unmarried, Separated and Deceased Claimants
If the Eligibility Income from PA Schedule SP, Line 11, does not exceed:
YOU ➡
$6,500
$6,750
▼ DEPENDENT CHILDREN

1
2
3
4
5
6
7
8
9

$16,000
$25,500
$35,000
$44,500
$54,000
$63,500
$73,000
$82,500
$92,000

$16,250
$25,750
$35,250
$44,750
$54,250
$63,750
$73,250
$82,750
$92,250

$7,000

$7,250

$7,500

$7,750

$8,000

$8,250

$8,500

$8,750

$16,500
$26,000
$35,500
$45,000
$54,500
$64,000
$73,500
$83,000
$92,500

$16,750
$26,250
$35,750
$45,250
$54,750
$64,250
$73,750
$83,250
$92,750

$17,000
$26,500
$36,000
$45,500
$55,000
$64,500
$74,000
$83,500
$93,000

$17,250
$26,750
$36,250
$45,750
$55,250
$64,750
$74,250
$83,750
$93,250

$17,500
$27,000
$36,500
$46,000
$55,500
$65,000
$74,500
$84,000
$93,500

$17,750
$27,250
$36,750
$46,250
$55,750
$65,250
$74,750
$84,250
$93,750

$18,000
$27,500
$37,000
$46,500
$56,000
$65,500
$75,000
$84,500
$94,000

$18,250
$27,750
$37,250
$46,750
$56,250
$65,750
$75,250
$84,750
$94,250

Then the Percentage of Tax Forgiveness and the Decimal Equivalent is:
100%
1.0

90%
.90

80%
.80

70%
.70

60%
.60

50%
.50

40%
.40

30%
.30

20%
.20

10%
.10

NOTE: If claiming more than nine (9) dependent children, go to the PA Personal Income Tax Guide – Tax Forgiveness on the department's website.

ELIGIBILITY INCOME TABLE 2. Married Claimants, even if filing separately
If the Eligibility Income from PA Schedule SP, Line 11, does not exceed:
YOU & ➡ $13,000
$13,250
SPOUSE
▼ DEPENDENT CHILDREN

$13,500

$13,750

$14,000

$14,250

$14,500

$14,750

$15,000

$15,250

1
2
3
4
5
6
7
8
9

$23,000
$32,500
$42,000
$51,500
$61,000
$70,500
$80,000
$89,500
$99,000

$23,250
$32,750
$42,250
$51,750
$61,250
$70,750
$80,250
$89,750
$99,250

$23,500
$33,000
$42,500
$52,000
$61,500
$71,000
$80,500
$90,000
$99,500

$23,750
$33,250
$42,750
$52,250
$61,750
$71,250
$80,750
$90,250
$99,750

$24,000
$33,500
$43,000
$52,500
$62,000
$71,500
$81,000
$90,500
$100,000

$24,250
$33,750
$43,250
$52,750
$62,250
$71,750
$81,250
$90,750
$100,250

$24,500
$34,000
$43,500
$53,000
$62,500
$72,000
$81,500
$91,000
$100,500

$24,750
$34,250
$43,750
$53,250
$62,750
$72,250
$81,750
$91,250
$100,750

$22,500
$32,000
$41,500
$51,000
$60,500
$70,000
$79,500
$89,000
$98,500

$22,750
$32,250
$41,750
$51,250
$60,750
$70,250
$79,750
$89,250
$98,750

Then the Percentage of Tax Forgiveness and the Decimal Equivalent is:
100%
1.0

4

PA-40 SP
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90%
.90

80%
.80

70%
.70

60%
.60

50%
.50

40%
.40

30%
.30

20%
.20

10%
.10

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NONTAXABLE INCOME
On Lines 2 through 10 of PA-40 Schedule SP, income must
be reported that is not reported as taxable on the PA-40,
Personal Income Tax Return, which PA law requires to be
reported for Tax Forgiveness purposes. If no amounts are
required to be reported on Lines 2 through 10, enter zero.
Annualized income from each of the sources for Lines 2
through 10 should be reported for decedents on the respective lines.

Enter the amount that represents the difference between the
total military income earned and the amount reported as taxable compensation on Line 1 of the PA-40 Personal Income
Tax Return. Do not include combat zone pay and hazardous
duty pay.

LINE 2

Enter the nontaxable gain from the sale of a principle residence.

Enter the amount of tax-exempt interest from Lines 6 and 7
of PA-40 Schedule A and any exempt-interest dividends included in Line 3 of PA-40 Schedule B as well as any exempt
income and gains from investments in direct obligations of
the federal government, Pennsylvania, and political subdivisions of Pennsylvania. Include the nontaxable portion of
gain from the sale of any property. Include nontaxable income received as a beneficiary of an estate or trust as well
as any tax-exempt income from a partnership or S corporation’s participation in a Keystone Opportunity Zone. For
decedents only: in addition to any annualized income for
nontaxable interest, dividends, and gains, include the difference between the total annualized income and the Pennsylvania-taxable income from Line 1 above as well as any
annualized tax-exempt interest or exempt-interest dividends.

LINE 3
Enter the amount of alimony received by the taxpayer
and/or spouse. Do not include child support payments received by a spouse.

LINE 4
Enter the amount of the total proceeds received from life or
other insurance policies. Also, include inherited cash or the
value of property received as well as the amount received
as reported on federal Form 1099-R with distribution code
4 reported in Box 7 of the form.

LINE 5
Enter the total amount of nontaxable cash or property received as gifts from others. Also, include awards received
in recognition of civic and social achievements and noncash
prizes from the Pennsylvania Lottery.

LINE 6
Part-year residents and nonresidents must complete this
line. Enter the total of all income, not already reported on
this schedule, earned, received, or realized while residing
outside Pennsylvania by the taxpayer and/or spouse. Include any amount exempted from taxation under the
Servicemembers Civil Relief Act. Part-year residents or nonresidents who file a paper copy of the PA-40, Personal Income Tax Return, must also include a copy of pages one
and two of their federal income tax return.
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LINE 7

LINE 8

LINE 9
Enter the amount of the total value of all nontaxable scholarships, fellowships, and stipends as well as the amount of
any federal and state educational grants received. Do not
include student loans. Also, include the value of tuition reductions offered as part of an employer’s benefit plan.

LINE 10
Enter on Line 10 the following kinds of nontaxable income
when determining Eligibility Income:
● Payments received as a foster parent for providing inhome care for foster children.
● Support received from a spouse or former spouse who
does not live in the household. Do not include payments
received for child support here – see the instructions for
Section II.
● Any payments received from other persons outside the
household, including nontaxable cash or property received for personal use, such as cash received from a
parent to buy clothing, or gifts from grown children. Do
not include monies paid pursuant to a cost-sharing
arrangement.
● Nontaxable payments to an employer’s cafeteria plan
for hospitalization, sickness, disability, or death, supplemental unemployment, or strike benefits.
If claiming a foster child in Section II, the payments received as a foster parent must be included. However,
if the foster care program did not place the child in the home,
or no payments were received for providing foster care, submit a written explanation that there is no income to report as
a foster parent. Include an explanation of the child’s relationship to the taxpayer.
● The value of the personal use of employer-owned or
leased property (if included in federal taxable income).
● The value of government education grants.
Do not include the following types of nontaxable income in
Line 10 when calculating Eligibility Income:
● Social Security and Railroad Retirement Benefits;
● Retirement benefits from Pennsylvania eligible retirement plans after becoming eligible to retire and retiring;
● United Mineworkers pensions;
● Child support (unless a dependent child of a taxpayer
also eligible for Tax Forgiveness);
● Military pension benefits;
● Civil Service annuity payments;
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● Payments received under workers’ compensation acts,
occupational disease acts or similar legislation including
Heart and Lung Pensions;
● Payment for injuries received while working and damages received, whether by suit or otherwise, for personal injuries;
● Sick pay and disability benefits, including payments by
third party insurers for sickness and disability;
● Damage awards and settlements from physical injury or
sickness – pain and suffering, emotional distress;
● Personal use of an employer’s owned or leased property and/ or services, at no cost or at a reduced cost (if
not included in federal taxable income); or
● Income from contracts of insurance for long-term care
that do not have accumulated refundable reserves
payable upon lapse or surrender.

LINE 11
Add Lines 1 through 10, and enter the total. If using
Columns B and C, add each column, and enter the total
on Line 11. Eligibility Income is the total amount of
Pennsylvania-taxable and nontaxable income that is used
to determine the percentage of Tax Forgiveness.

LINE 13
Enter the amount of any resident credit claimed on Line 22
of the PA-40, Personal Income Tax Return.

LINE 14
Subtract Line 13 from Line 12 and enter the result.

LINE 15
Find the Tax Forgiveness percentage and decimal equivalent using the dependents from Section II, Line 2, the Eligibility Income from Section III, Line 11, and the appropriate
Eligibility Income Table below. Enter the decimal equivalent
on Line 15.

LINE 16
Multiply Line 14 by the decimal on Line 15. Enter the product
here and on Line 21 of the PA-40, Personal Income Tax
Return.

SECTION IV
CALCULATING TAX FORGIVENESS

LINE 12
Enter the amount of the PA tax liability from Line 12 of the
PA-40, Personal Income Tax Return. If filing an amended
return, enter the amount from Line 12 of the amended PA40.

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