Who is self-employed in Pennsylvania
- The trades. Contractors, plumbers, electricians, roofers and restoration specialists working housing stock that is old in the cities and older in the countryside.
- Healthcare contractors. 1099 physicians, nurse anesthetists and specialists around UPMC, Penn Medicine, Jefferson and Geisinger, and the practices that serve their suburbs.
- Trucking and logistics along I-80, I-81 and the Lehigh Valley warehouse belt, owner-operators paid by settlement.
- Marcellus royalty owners in the northern tier and the southwest, with monthly checks that follow the gas price.
- Poconos and lake rental owners, and the professionals of the Main Line, Bucks County and the North Hills organized as S-corps.
What is specific to a Pennsylvania file
- No mortgage recording tax. Pennsylvania's realty transfer tax applies to deeds. Recording a home equity line involves county recorder fees only.
- Rowhomes and twins are fee-simple property. A Philadelphia or Pittsburgh rowhouse is the standard case. Condominiums include a look at the association.
- Gas royalties are deposits. Monthly royalty payments into your account are income for this file. Depletion on the return never enters it.
- Poconos and lake property. A vacation home qualifies as a second home with lower maximums; one you rent out qualifies on rental deposits as investment property. In the gated Poconos communities, association dues are counted as an obligation.
- Valuation. Philadelphia and its collar counties, Pittsburgh, the Lehigh Valley, Harrisburg and Lancaster have deep automated-valuation data. Rural and mountain counties are thinner, so an appraiser is more likely there even under $400,000.
The contractor's Section 179 problem
A Bucks County remodeler had a strong year, bought two trucks and a trailer, and expensed all of it under Section 179. The operating account shows the strong year. The return shows a loss. A bank lends on the return and declines a business that just proved it could afford new equipment. This program reads the 12 months of customer deposits, and the equipment purchase is irrelevant to the income side.
Common questions
I expensed two trucks last year and my return shows a loss. Can I qualify?
The return is not part of this file. Twelve months of deposits into your business account are the income, and the equipment purchase does not reduce them.
Do my Marcellus royalties count?
Yes. Monthly royalty deposits are income like any other deposit; depletion on the return never enters the file.
Is there a Pennsylvania tax when the lien is recorded?
No. The realty transfer tax applies to deeds. A home equity line involves county recorder fees only.
Our Poconos house is in a gated community with dues. Is that a problem?
No. Dues are counted as a monthly obligation. Whether the house is a second home or a rental sets the maximums.