137T Tax Code: Filing, Exemptions, and Payment Plans

The 137T tax in Philadelphia is the city’s School Income Tax (SIT), a levy on residents’ unearned income that funds the School District of Philadelphia. Form 137T is the older name; the city now calls it the SIT return and processes it through the Philadelphia Tax Center. The rate for tax year 2025, filed in spring 2026, is 3.74%, and returns are due April 15.¹

The tax has existed since 1967 and applies to investment-type income: dividends, short-term capital gains, certain interest, and several other categories covered below.² Wages and business income are not part of it; those get taxed elsewhere by the city.

Who Has to File

Any Philadelphia resident who receives taxable unearned income during the calendar year has to file. The city has not published a minimum dollar threshold, so even small amounts technically create a filing obligation.¹

If you moved into or out of the city during the year, you’re a part-year resident and prorate the tax. Income that accrues over time, like dividends on stock you held all year, gets split by how long you lived in Philadelphia. For a one-time event like a short-term stock sale, your residency on that exact date decides whether the gain is taxable. Sell before you move in, and the gain is not Philadelphia’s to tax even if you finish the year as a resident.³

What Income Is Taxable

The city’s list of taxable unearned income is broader than most people assume:¹

Dividends, unless they represent a return of capital on a life insurance policy, come from common stock of a national bank, or derive from U.S. government obligations.
Short-term capital gains from selling property, stocks, or bonds held for six months or less.²
Royalties from intellectual property or natural resources.
S-Corporation distributions reported on a K-1.
Limited partnership profit distributions.
Net gambling winnings, including Pennsylvania Lottery cash prizes.³
Interest from corporate bonds and private loans.
Net rental income from your principal residence, if the property is entirely residential with three or fewer rental units and the income is not already subject to the Business Income and Receipts Tax.
Annuity income under an insurance policy, unless it is paid through an employer retirement or pension plan.
Punitive damage awards.
Certain distributions from estates and trusts paid to a Philadelphia resident.

The six-month rule for capital gains catches people off guard. Federal law splits short-term and long-term at one year; Philadelphia draws the line at six months. Sell a stock seven months after buying it and you owe federal short-term capital gains tax but no Philadelphia SIT on that sale.

Losses in one category cannot offset gains in another. If dividends produced a gain and a stock sale produced a loss, you cannot net them. Any line showing a net loss gets entered as zero. On a combined return, one spouse’s losses cannot offset the other spouse’s gains.³

What Is Exempt

Income exempt from the SIT includes:⁴

Interest from savings accounts, checking accounts, certificates of deposit, money market savings accounts, credit unions, and building and loan associations.
Interest from direct obligations of the federal government and from bonds or debt obligations of Pennsylvania or its political subdivisions.
Anything already reported on the Philadelphia Wage Tax or the Business Income and Receipts Tax, including W-2 wages and Federal Schedule C business income.
Annuity income payable from a contract of employment as part of a retirement or pension plan.
Long-term capital gains, meaning gains on assets held longer than six months.
Return-of-capital dividends on life insurance policies, dividends from national bank common stock, and dividends from U.S. government obligations.

Social Security benefits are federal payments and fall outside the SIT’s scope, so they do not go on this return.

Calculating What You Owe

The 2025 rate is 3.74%. The 2024 and 2023 rate was 3.75%.¹ Multiply your total taxable unearned income, after zeroing out any loss lines, by the rate for the year you’re filing. Someone with $10,000 in taxable dividends for tax year 2025 owes $374.

How to File

Your SIT return and payment are due April 15, matching the federal deadline. If April 15 lands on a weekend or holiday, the due date moves to the next business day.¹ The SIT is self-reported: the city expects you to calculate, file, and pay without receiving a bill.

Before starting, pull your Federal Schedule B for interest and dividends and your Federal Schedule D for capital gains. Your Philadelphia tax account number or Social Security number ties the filing to your record. The city recommends filing electronically at the Philadelphia Tax Center (tax-services.phila.gov), which provides immediate confirmation. Paper returns are also available from the Department of Revenue’s forms page and get mailed in with a payment voucher.¹

Penalties If You Pay Late

Missing April 15 triggers both a penalty and interest. Under Philadelphia Code § 19-509, the penalty is 1.25% of the unpaid tax for each month or partial month the balance stays outstanding.⁵ Interest accrues separately at the federal short-term rate set by the U.S. Treasury on January 1 of that year plus five percentage points. Both charges run from the original due date until the tax is paid in full.

Payment Plans

If you cannot pay in full, the city offers two structured payment agreements instead of demanding a lump sum:⁶

A preferred agreement, available if this is your first delinquency or you’ve completed one previous plan. It carries the maximum penalty discount and up to 60 months to pay.
A standard agreement, available to everyone else. It still discounts penalties, with a repayment window that caps at 48 months.

Both require an affordable down payment and require you to stay current on future filings while paying off the overdue balance. To apply, log into the Philadelphia Tax Center, open the “Payments and returns” tab, and select “Request payment agreement.” If you can’t apply online, call (215) 686-6600 or email revenue@phila.gov.⁶ Defaulting brings back the full penalties and opens the door to legal action, so only commit to a monthly amount you can sustain.

1
City of Philadelphia. School Income Tax
2
City of Philadelphia. Unearned Income in Philly is Subject to the School Income Tax
3
City of Philadelphia. General Information for 2025 School Income Tax (SIT)
4
City of Philadelphia. General Information for 2024 School Income Tax (SIT)
5
American Legal Publishing. Philadelphia Code 19-509 – Interest, Penalties and Costs
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City of Philadelphia. Set Up a Payment Agreement for Your Business or Income Taxes