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I am a US citizen living in the US. I am employed and make a salary. I have also had some short term capital gains, which I expect to pay regular federal and state income taxes on. Additionally, I am a resident of the city of Philadelphia. Philadelphia has a city income tax (~4%), and a school tax on unearned income (~3.9%). Unearned income is income I make outside of work, meaning my short term capital gains qualify as unearned income. My question is, do my capital gains get taxed by both the unearned income school tax and the city income tax? Do they stack? Or do I only owe the former, since it is unearned income?

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The city of Philadelphia has three types of income taxes:

  • Wage Tax: This is tax that is withheld from your paycheck by your employer if you either work in the city or you live in the city and work in Pennsylvania.

  • Earnings Tax: This is paid by anyone who lives in the city and is employed (not self-employed; other types of taxes apply to them) and does not have any wage tax withheld by their employer. It is only on earned income.

  • School Income Tax: This is paid by residents of the city who have certain types of unearned income, including capital gains.

Your capital gains income will be subject to the School Income Tax, but not the Wage/Earnings Tax.

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