Discussion-PA Discussion

Discussion-PA Discussion




PAclasses of income refer to classes of personal income and they areusually eight of them. They include, compensation,interest ,dividends, net Income (loss) from the operation of abusiness, profession, or farm, net gain (loss) on the sale, exchange,or Disposition of Property, Net Income (Loss) from Rents, Royalties,Patents, and Copyrights, Income from Estates or Trusts, Gambling andLottery Winnings (Potter,Shelby, and Cook, 2008).


Anoffset of loss in one class against a gain in another is not possiblein Pennsylvania. Thus, one cannot counterbalance a loss in one classwith a gain in another. One may assume that since loss or gainsrealized affect the same person, it would be fair to counteract thetwo. For instance, if one sold some mutual funds at a loss and didnot have any gains from selling other stock or property, that losscannot be subtracted from their gross income. Though PA allow theoffset of losses with gains of the same person in the same class, itis still not fair.

Injoint returns, the loss of one spouse can’t be used to offset thegains of the other within the same class of income. Suppose a couplesold two stocks in one year for a total net loss of 25000 (one lost25000, one gained 11000).if the wife lost the 25000 and the husbandgained the 11000, the 11000 would be taxed. Spouses, whether fillingjointly or separately, may not use each other’s expenses to reducethe income or offset each other’s income. So they may file a jointtax return for convenience only, since PA law has no advantage whenfiling a joint tax return.

Responseto discussion

PAallows the deductions for health and medical saving accountcontributions as well as tuition account program contributions (not401 (k) or IRA) as outlined in IRC section 529 tuition. It does nothave any standard deduction or personal exemption. Further capitallosses may not necessarily be deducted against capital gaindistributions received from mutual funds the deduction can only bedone against capital gains and may not be carried from previous years(Potter et al., 2008). Further, PA excludes social security asincome. IRAs, withdraws, retirement plans, and pensions plans cannotbe taxed if withdrawn after attaining and meeting age requirementshowever any net gains are taxed.


Potter,C.L., Shelby, J. D., and Cook, E.P. (2008). Guidebookto Pennsylvania Taxes.Lake Cook: CCH.