Cities with an Income Tax

After you file your federal and state tax returns, you may still have to file a city income tax return

Everyone knows they have to send Uncle Sam a federal income tax return every April, and most people also realize they have to file a state income tax return at the same time – unless of course you’re lucky enough to live in one of those states without income tax.

But did you know that you might owe city income tax too? That’s right. Lots of cities, both big and not-so-big, levy a city income tax.

Cities that tax

New York City is probably one of the most famous examples. It charges every individual, estate, and trust residing within the city an income tax of between 2.907% and 3.648%. Even part-year residents have to calculate their taxes based on how many days they lived in NYC.

There are no New York City-specific deductions, but there are some NYC credits available, which you should see if you qualify for, including:

• NYC Child and Dependent Care Credit
• NYC Earned Income Credit
• NYC Household Credit
• NYC School Tax Credit

While New York is certainly one of the highest-taxing cities, it is hardly alone. If you live in one of the following cities, you will also owe an income tax of some sort:

• Birmingham, AL – 1% income tax
• District of Columbia – 4% on the first $10,000, 6% between $10,000 and $40,000, and 8.5% over $40,000
• Louisville, KY – 2.2% on residents, 1.45% on nonresidents
• Baltimore, MD – 3.05%
• Detroit, MI – 2.5% for residents, 1.25% for nonresidents
• Kansas City and St. Louis, MO – 1%
• Ohio – 235 cities and 331 villages in Ohio have an income tax, including the major cities of Columbus, Toledo, Cincinnati, and Cleveland
• Pennsylvania – some cities in Pennsylvania have a tax on wages called an Earned Income Tax, including Philadelphia (3.98%) and Pittsburgh (3%)

These aren’t the only cities either. Check to see if your city or municipality has an income tax before next tax season.

How do you file for city taxes?

How do you go about filing city taxes? That gets a little more complicated. In some cities, like New York for example, you can pay your city tax right on your state return. This makes it really easy to take care of and doesn’t add another form to the long list you probably already need to file.

The bad news is that there are plenty of cities out there that do not coordinate their taxes with the state. In these cases, you will have to file a separate city tax return. Be sure to check with your city’s tax authority to find out how you are supposed to file.

PriorTax offers online preparation of federal and state tax returns. So if your city taxes are included on your state return – great, you can take care of everything right here. But if you have to file a separate city return, unfortunately you won’t be able to do it on PriorTax. You can find a local or tax professional or fill it out yourself. Thankfully city returns tend not to be too complicated.

Really hate city taxes?

You could always try moving to one of these states that prohibit city taxes:

• California
• Florida
• Illinois
• Massachusetts
• Texas
• West Virginia

Photo via Vincent on Flickr.

This entry was posted on Wednesday, December 5th, 2012 at 7:21 pm and is filed under Tax Tips and Tricks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.