Instructions For PA Schedule SP

Instructions For PA Schedule SP

Are you ready to begin?
If you are filing a paper return, make sure that you have completed Lines 1 through 18 of your PA-40, PA Personal Income Tax Return, before completing PA Schedule SP.
Begin completing Schedule SP by entering your name and your spouse’s name, marital status and Social Security number(s). If you are single, leave the space for spouse blank.  You must also answer the eligibility questions at the top of the schedule. 
If you are a student and may be claimed as a dependent on another person's (parent, grandparent, guardian, etc.) federal tax return, check "Yes" for Question 1.  Ask the person who may claim you if he/she is eligible for PA Tax Forgiveness.  If so, check  "Yes" for Question 2 and complete Line 1b or 3c in Part A.  If you check "No" to Question 2, stop - you are not eligible for Tax Forgiveness.  If you check "No" to Question 1, you may still be eligible for Tax Forgiveness.  Please continue to determine if you are eligible.
PA Schedule SP is divided into four parts -- A, B, C and D.

Part A  

In Part A, indicate what kind filer you are: unmarried, married or separated. If you are filing for someone who has died, select "deceased." Then proceed to choosing your filing status, unmarried or married.

  • If you are unmarried, fill in the appropriate ovals.
    • Most people select the first "Single" oval. Fill in this oval if you are unmarried, widowed or divorced.
    • Fill in the second "Single" oval if you may be claimed as a dependent on someone else’s federal return and that person qualifies for Tax Forgiveness.  Also include the Social Security number and name of the person on whose tax return you are a claimed as a dependent. 
  • Fill in the "Separated" oval if you are legally separated or legally married but have lived apart for the last six months or more of the taxable year.
  • If married, fill in the appropriate ovals. 
    • The first "Married" oval is for people who are married and file a joint return.
    • The second oval is for married couples who file separate returns.
    • The third oval is for anyone married and claimed as a dependent on another person's federal return and that person qualifies for Tax Forgiveness. Enter the Social Security number and name of the person on whose return you are claimed.
    • The fourth oval is for anyone separated and living apart from his/her spouse for less than the last six months of the year.  Enter the spouse's Social Security number and name at the top of the PA Schedule SP.
  • The "Deceased" oval is to be used when the person named on the return has died. The deceased's income must be annualized for the year to determine if he/she qualifies for Tax Forgiveness. To annualize income, calculate the amount of income the person would have received if he/she had lived all year. 
    • You may base eligibility income on the prior year’s return if the individual was eligible for Tax Forgiveness and would have received approximately the same income during this taxable year.
    • You may calculate eligibility income by dividing the income realized by the decedent in the taxable year by the number of days or months the decedent lived, then multiplying by 365 days or 12 months, respectively.
    • If there any one-time transactions occurred, such as the sale of stock or real property, these amounts should not be considered when determining income for the decedent.
    • The department will accept a reasonable calculation of the decedent’s annualized income.          

      IMPORTANT: Do not include a surviving spouse’s income (including one-half of any joint income received prior to the decedent’s death) in the calculation of the decedent’s income. Similarly, surviving spouses should not include any income from the decedent (including income included on the estate tax return and the decedent’s half of any joint income received prior to the decedent’s death) in his/her own taxable or eligibility income.

IMPORTANT: Do not include a surviving spouse’s income (including one-half of any joint income received prior to the decedent’s death) in the calculation of the decedent’s income. Similarly, surviving spouses should not include any income from the decedent (including income included on the estate tax return and the decedent’s half of any joint income received prior to the decedent’s death) in his/her own taxable or eligibility income.

Any full-time student who is a dependent on his/her parents’ federal income tax return cannot claim this credit, regardless of income, unless his/her parents are eligible for Tax Forgiveness. In this case, the student must file his/her own tax return and PA Schedule SP.

Part B
Part B is for taxpayers who have dependent children to claim for Tax Forgiveness. If you do not have children, move on to Part C.
To complete Part B, record the name, age, relationship and Social Security number for each dependent child. A dependent child is a child you claim on your federal income tax return in this taxable year. If you have more than four dependents, record the information on another sheet of paper, label the attachment "PA Schedule SP, Additional Dependents" and include the list with your PA Schedule SP.
For these purposes, a dependent is a minor or adult child claimed as a dependent on your federal income tax return.
The Department of Revenue has a two-step test for to determine dependent children:
  1. Is the individual a child of the claimant?

    For PA income tax purposes, parents' natural children, adopted children and step-children may be claimed as dependents. Grandchildren of grandparents and a foster children of foster parents may also be claimed.  Therefore, you may claim any son, daughter, grandchild or foster child as a dependent for PA Schedule SP if you can claim the child as a dependent on your federal income tax return. 

    However, for PA purposes an aunt, uncle or unrelated person may not claim a child as a dependent, 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 may claim the child as a dependent for federal purposes. For example, parents who may claim a qualifying 30-year-old child for federal purposes may claim that child as a dependent for PA purposes.

    You may not claim a dependent child on PA Schedule SP if:
    • The dependent is not your child, as defined above;
    • You cannot claim the child on your federal tax return; or
    • You are unmarried and your former spouse may claim your child as a dependent for federal and PA purposes.

The Department of Revenue may ask to see your federal income tax return if you claim a foster child, adult child or more than four dependents. To avoid delays, include with PA Schedule SP a copy of the first page of your federal return. 

Record the number of dependents you claim in Box 2 on the right-hand side of the schedule. 

Part C
In Part C, add in nontaxable income to determine eligibility income.
Line 1. Record your taxable income from Line 9 of your PA-40 Personal Income Tax return.  If filing as married or unmarried, use the column to the left to report income amounts.  If filing as separated, use the two columns to the right.  You must also obtain and report your spouse's income when filing as separated.
Line 2. Enter nontaxable income, including interest, dividends and gains. Include income you do not report as taxable on your PA return. The most common form of a federal government security is U.S. savings bonds. If you cashed in bonds, the interest is not taxable, but it is to be included in eligibility income.
Also include any nontaxable income you received as a beneficiary of an estate or trust and nontaxable income from investments in direct obligations of the federal government, Pennsylvania and/or its political subdivisions, even if they were purchased through a mutual fund or other regulated investment company.
Line 3. Enter the amount of federally taxable alimony you received.
Line 4. Enter the amount of any insurance or inheritances you received, including proceeds from life or other insurance policies and the value of property or cash inherited.
Line 5. Enter the amount of nontaxable cash or property you received as gifts from others. Also include awards given in recognition of civic and social achievements and winnings from the PA Lottery.
Line 6. This line is for part-year residents or nonresidents claiming Tax Forgiveness. Enter the total of all other income earned, received and realized while residing outside PA. This includes income that would be taxable if earned and received in Pennsylvania and nontaxable income you would report on this schedule if you were a PA resident.  If you are a part-year resident or nonresident and you file a paper PA-40 return, also include a copy of Page 1 of your federal tax return.  If you file your return through the Fed/State e-file program, you are not required to inlcude a copy of Page 1 of your federal return. 
Line 7. Enter nontaxable military income. This is the difference between the total military income you earned and the amount you report on your PA tax return. Do not include combat zone pay or hazardous duty zone pay.
Line 8. Record any nontaxable gain from the sale of your principal residence.
Line 9. Record the total value of any nontaxable scholarships, fellowships and stipends you received, including government educational grants, but not student loans. Include the value of any tuition reductions offered as part of your employer’s benefit plan.
Line 10. If a spouse or former spouse not living in your household pays support to you, include that support in your eligibility income. Also include any payments received from other persons outside your household, including nontaxable cash or property received for personal use.  Examples include cash received from a parent to buy clothing and gifts from grown children. Do not include monies paid pursuant to a cost-sharing arrangement. Do not include child support, as child support is considered your child's nontaxable income if he or she files for Tax Forgiveness. Include on Line 10 the following kinds of nontaxable income:
  • Support you receive from a spouse or former spouse who does not live in your household;
  • Nontaxable payments to your employer's withholding plan for hospitalization, sickness, disability, death, supplemental unemployment or strike benefits; and
  • Payments received as a foster parent for providing in-home care for foster children.
Line 11. Add Lines 1 through 10 and enter the total on Line 11. If filing as married, add both columns and enter the total in the Joint Income box to the far left. If filing as unmarried, enter the total in the box to the far left. 

Part D
In Part D, calculate the amount of your Tax Forgiveness.
Line 12. Record the your PA tax liability from Line 12 of your PA-40.
Line 13. Record tax paid to other states or countries. If none, leave blank.
Line 14. Subtract Line 13 from 12. If Line 13 is blank, enter the amount from Line 12.
Line 15. To fill in Line 15, refer to the Eligibility Income Tables  or Page 36 of the PA-40 tax booklet. If filing as unmarried, use Table 1. If filing as married, use Table 2.
  • Move down the left side of the table until you come to the number of dependent children entered in Part B, Box 2.
  • Then move across the row to find your income category. At the bottom of that column is an the percentage of Tax Forgiveness for which you qualify. Record the decimal in the space provided on Line 15.
Line 16. Multiply Line 14 by Line 15 and record the amount on Line 16. Then enter the amount from Line 16 on Line 21 of your PA-40 tax return.
When you return to the PA-40, record the following information from your PA Schedule SP on your PA-40: your filing status (Part A of PA Schedule SP) on Line 19a, the number of dependents (Part B of PA Schedule SP) on Line 19b and your eligibility income (Part C of PA Schedule SP) on Line 20.
To finish completing your PA-40 return, add the amounts on Lines 13, 18, 21, 22 and 23 and enter the total on Line 24.  Next, follow the instructions on you PA-40 to determine if you have an overpayment or owe PA income tax.