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1. Do I have to file a return?

As of August 18, 2022, all residents of Trenton age, 18 or older, are required to file a tax return regardless of where they work. This change will take place for the 2022 City Tax Returns. Prior year returns, all residents of Trenton age, 16 or older, are required to file a tax return regardless of where they work. 

2. Do I have to file a return if I work in Trenton but live elsewhere?

You are subject to tax on all income earned while working in the City, regardless of where you live or where your employer’s main office is located. But, the City holds the employer liable for withholding the tax. Therefore, you do not have to file a Trenton tax return if you work in Trenton but live elsewhere. Exceptions to this:

• If you are a Federal employee working in the City of Trenton and your city tax is not withheld you must file a Trenton tax return.
• If you are self-employed in the City of Trenton and live elsewhere, you must file a Trenton tax return.

3. What income is taxed by the City?

Earned income is subject to the Trenton local income tax but unearned income is not. Common illustrations of earned income include the following paid by the employer(s) before any deductions:

• Bonuses
• Commissions
• Salaries
• Wages
• Other Compensation

Unlike for your Federal return, you may not deduct contributions to a retirement plan (IRA, 401k, 403b, or 457b) on your Trenton return. Gross earnings are taxed in the year earned. Most pension and retirement income are not taxable when you are retired and receiving distributions.

4. What income is non-taxable?

The City does not tax unearned income. Examples of unearned income are:

• Alimony Received
• Capital Gains (Unless Taxed as Ordinary Income)
• Clergy Housing Allowance
• Dividends
• Interest
• Military Pay Is Also Not Taxable
• Most Pension or Retirement Income
• Social Security
• State Unemployment Benefits
• Welfare Assistance
• Worker’s Compensation

Additionally, income earned by individuals under 18 is not taxable by the City until the day they reach age 18. If Trenton taxes have been withheld while you were under age 18, you may file for a refund of this amount of tax on income earned before your birthday. (Attach proof of age, such as a copy of your driver’s license or birth certificate).

5. What expenses are deductible from earned income on the return?

The only expenses that can be deducted from earned income as an individual are those reported on Line 26 of Federal Schedule A - Itemized Deductions. These pertain to unreimbursed business expenses incurred as an employee. (You may not use the amount on Federal Form 2106 since the Federal limitations do apply). This deduction only applies if the original local taxes were paid to Trenton.

6. What if I also earn incidental income on the side?

You may be employed and also earn incidental income on the side. If so, your incidental net income is subject to tax. It might be in the form of fees for consulting or professional services, honorariums from speaking engagements, royalties from publications, small construction jobs, rental property, or other earned income. If you are a small business, this will typically show up as a Schedule C on your Federal return.

7. What if I earn incidental income from more than one unincorporated business?

You may combine the results of each business and report the total on page one of the Form IR, Please also attach copies of all applicable federal forms.

8. How are net operating losses from side businesses treated?

Net operating losses cannot be used to offset employee wages. For unincorporated businesses, if you operated more than one business, a net operating loss within the city can be used to offset profits from any other type of business you operate within the city. The remainder of the loss that could not be offset to other business profits can be carried forward to be used as a future offset for up to five. Losses must be reported on Form IR, but are not deducted in the computation of your individual taxable income.