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Township to Increase the Township’s Earned Income Tax in 2021
 
Posted on Wednesday December 23, 2020
 
On December 16, 2020, the Cheltenham Township Board of Commissioners increased the Earned Income Tax by 0.5%. Starting January 1, 2021, an additional 0.5% will be deducted from your paycheck.
 

As part of a comprehensive effort to address the Township’s financial challenges in a manner which is both equitable and avoids unduly burdening residential property taxpayers, the Cheltenham Township Board of Commissioners voted to increase the Township’s share of the Earned Income Tax (EIT) by an additional 0.5%. The increase will go into effect January 1, 2021.

Formerly, a 1% total Earned Income Tax was assessed on the wages of all Township residents, with the exception of those who work in the City of Philadelphia. Residents who pay the City Wage Tax are exempt from paying the Township’s EIT. One half of 1% (0.5%) of the EIT goes to the Cheltenham School District and the other 0.5% of the EIT was distributed to Cheltenham Township. With the January 1, 2020 increase, the total EIT paid by Township residents will be 1.5%, of which the Township will receive 1% and the School District portion will remain 0.5%.

Employers will deduct the additional EIT from your paycheck. Berkheimer, the organization that collects the EIT for the Township and School District, will mail letters to each resident and employer; but you should notify your employer, as well.

If you are self-employed or employed outside of Pennsylvania, you will be required to file a quarterly return on your own behalf with Berkheimer no later than the last day of the month after the end of each quarter. Fees and penalties may apply for late or incorrect filing. For more information or to e-file, visit: www.berk-e.com or contact Berkheimer’s Customer Care Department at (610) 599-3139. 

For more information about the EIT, visit the Earned Income Tax webpage.

Why the Township Board of Commissioners Proposed this Increase

This past year, Cheltenham Township received a State grant to study its current and projected financial situation over the next five years. The final Report was presented publicly at the June 17, 2020 meeting of the Board of Commissioners.

Findings of that Report confirm serious financial challenges – ongoing and worsened by the COVID-19 pandemic – and make a number of specific recommendations to the Board and Community, which include expense reductions, operating consolidations, and selective increases in certain revenue categories.

Increasing the EIT is one of the most consequential of these recommendations. The EIT is levied only on the wages paid to those gainfully employed. For example, in 2020, if you earned $50,000 in gross wages as per your W-2 form, your EIT obligation is $500 for that taxable year, of which $250 would be received by the Township. This equates to $9.62 added to your paycheck if you are paid every two weeks.

EIT funding represents both an equitable and more substantial source of revenue, with the responsibility to pay the EIT solely on those who are or were employed during the calendar year. The Board of Commissioners recognizes the growing burden that real estate taxes impose on residential taxpayers and the fact that Cheltenham Township’s real estate millage and special fees fall short of the financial requirements to enable the Township to deliver the essential services Cheltenham Township residents need and expect from their government.

The proposed increase in EIT:

  • Improves the Township’s ability to provide essential services.
  • Helps preserve Cheltenham Township’s quality of life.
  • Reduces the Township’s reliance on future real estate tax increases.
  • Avoids additional burden on seniors and retirees who do not earn wages.
  • Minimizes the impact on those who may have suffered a loss of employment due to the pandemic and other reasons.

More information about the EIT increase can be found on the Earned Income Tax for 2021 webpage.

 
 
Cheltenham Township   ~   8230 Old York Road   ~   Elkins Park, PA 19027
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