Uncapp the real estate taxes in the Virginia itmemized deduction logic

PavelMakarchuk · PavelMakarchuk · commit 001c0598f166 · 2024-05-16T00:04:22.000-04:00
Fixes #4505
diff --git a/changelog_entry.yaml b/changelog_entry.yaml
@@ -0,0 +1,4 @@
+- bump: patch
+  changes:
+    fixed:
+    - Uncapp the real estate taxes in the Virginia itmemized deduction logic.
diff --git a/policyengine_us/parameters/gov/states/al/tax/income/agi/gross_income_sources.yaml b/policyengine_us/parameters/gov/states/al/tax/income/agi/gross_income_sources.yaml
@@ -27,4 +27,4 @@ metadata:
     - title: 2021 Alabama Department of Revenue Form 40
       href: https://www.revenue.alabama.gov/forms/2021-alabama-individual-income-tax-return-2/
     - title: The Code of Alabama 1975 Section 40-18-14 (a)
-      href: https://casetext.com/statute/code-of-alabama/title-40-revenue-and-taxation/chapter-18-income-taxes/article-1-general-provisions/section-40-18-14-adjusted-gross-income-of-individuals
+      href: https://casetext.com/statute/code-of-alabama/title-40-revenue-and-taxation/chapter-18-income-taxes/article-1-general-provisions/section-40-18-14-adjusted-gross-income-of-individuals
diff --git a/policyengine_us/parameters/gov/states/va/tax/income/deductions/itemized/reduction/applicable.yaml b/policyengine_us/parameters/gov/states/va/tax/income/deductions/itemized/reduction/applicable.yaml
@@ -2,9 +2,9 @@ description: Virginia sums up the following deductions to compute the itemized d
 values:
   2013-01-01:
     - medical_expense_deduction
-    - salt_deduction
     - interest_deduction
     - charitable_deduction
+    - real_estate_taxes
     - casualty_loss_deduction
 metadata:
   unit: list
diff --git a/policyengine_us/tests/policy/baseline/gov/states/va/tax/income/deductions/va_itemized_deductions.yaml b/policyengine_us/tests/policy/baseline/gov/states/va/tax/income/deductions/va_itemized_deductions.yaml
@@ -14,9 +14,8 @@
   period: 2021
   input:
     filing_status: HEAD_OF_HOUSEHOLD
-    real_estate_taxes: 50_000
     adjusted_gross_income: 800_000 # > $306,300
-    state_and_local_sales_or_income_tax: 10_000
+    state_and_local_sales_or_income_tax: 60_000
     state_code: VA
   output:
     va_itemized_deductions: 0
@@ -67,57 +66,3 @@
     state_code: VA
   output:
     va_itemized_deductions: 40_000 #20,000+20,000
-
-- name: Tax unit with taxsimid 7856 in k21.its.csv and k21.ots.csv - Integration test
-  absolute_error_margin: 2
-  period: 2021
-  input:
-    people:
-      person1:
-        age: 63
-        employment_income: 82010
-        qualified_dividend_income: 4005.0
-        taxable_interest_income: 5505.0
-        short_term_capital_gains: 2005.0
-        long_term_capital_gains: 2505.0
-        rental_income: 4505.0
-        taxable_private_pension_income: 1500.0
-        social_security_retirement: 5000.0
-        real_estate_taxes: 24000
-        mortgage_interest: 36000
-        self_employment_income: 158010
-        business_is_qualified: true
-        business_is_sstb: false
-        w2_wages_from_qualified_business: 100e6
-      person2:
-        age: 63
-        employment_income: 82010
-        qualified_dividend_income: 4005
-        taxable_interest_income: 5505
-        short_term_capital_gains: 2005
-        long_term_capital_gains: 2505
-        rental_income: 4505
-        taxable_private_pension_income: 1500
-        social_security_retirement: 5000
-      person3:
-        age: 16
-      person4:
-        age: 16
-      person5:
-        age: 16
-    tax_units:
-      tax_unit:
-        members: [person1, person2, person3, person4, person5]
-        tax_unit_itemizes: True
-        state_income_tax: 19956.35
-    spm_units:
-      spm_unit:
-        members: [person1, person2, person3, person4, person5]
-        snap: 0  # not in TAXSIM35
-        tanf: 0  # not in TAXSIM35
-    households:
-      household:
-        members: [person1, person2, person3, person4, person5]
-        state_fips: 51  # VA
-  output:  # expected results from patched TAXSIM35 2024-03-21 version
-    va_itemized_deductions: 35_282
diff --git a/policyengine_us/tests/policy/baseline/gov/states/va/tax/income/deductions/va_reduced_itemized_deductions.yaml b/policyengine_us/tests/policy/baseline/gov/states/va/tax/income/deductions/va_reduced_itemized_deductions.yaml
@@ -13,9 +13,8 @@
   period: 2021
   input:
     filing_status: HEAD_OF_HOUSEHOLD
-    real_estate_taxes: 50_000
     adjusted_gross_income: 800_000 # > $306,300
-    state_and_local_sales_or_income_tax: 10_000
+    state_and_local_sales_or_income_tax: 60_000
     state_code: VA
   output:
     va_reduced_itemized_deductions: 0
diff --git a/policyengine_us/tests/policy/baseline/gov/states/va/tax/income/integration.yaml b/policyengine_us/tests/policy/baseline/gov/states/va/tax/income/integration.yaml
@@ -78,3 +78,63 @@
   output:  # expected results from patched TAXSIM35 2024-03-01 version
     va_income_tax: 1_969.48
 
+- name: Tax unit with taxsimid 5034 in k21.its.csv and k21.ots.csv
+  absolute_error_margin: 1
+  period: 2021
+  input:
+    people:
+      person1:
+        age: 54
+        employment_income: 137010
+        qualified_dividend_income: 3505.0
+        taxable_interest_income: 5505.0
+        long_term_capital_gains: 1005.0
+        rental_income: 2505.0
+        real_estate_taxes: 24000
+        mortgage_interest: 14000
+        self_employment_income: 141010
+        business_is_qualified: true
+        business_is_sstb: false
+        w2_wages_from_qualified_business: 100e6
+      person2:
+        age: 54
+        employment_income: 65010
+        qualified_dividend_income: 3505.0
+        taxable_interest_income: 5505.0
+        long_term_capital_gains: 1005.0
+        rental_income: 2505.0
+        ssi: 0  # not in TAXSIM35
+        state_supplement: 0  # not in TAXSIM35
+        wic: 0  # not in TAXSIM35
+        ma_covid_19_essential_employee_premium_pay_program: 0  # not in TAXSIM35
+      person3:
+        age: 11
+        ssi: 0  # not in TAXSIM35
+        state_supplement: 0  # not in TAXSIM35
+        wic: 0  # not in TAXSIM35
+        ma_covid_19_essential_employee_premium_pay_program: 0  # not in TAXSIM35
+      person4:
+        age: 11
+        ssi: 0  # not in TAXSIM35
+        state_supplement: 0  # not in TAXSIM35
+        wic: 0  # not in TAXSIM35
+        ma_covid_19_essential_employee_premium_pay_program: 0  # not in TAXSIM35
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3, person4]
+        tax_unit_itemizes: True
+        state_income_tax: 20045.91
+    spm_units:
+      spm_unit:
+        members: [person1, person2, person3, person4]
+        snap: 0  # not in TAXSIM35
+        tanf: 0  # not in TAXSIM35
+    households:
+      household:
+        members: [person1, person2, person3, person4]
+        state_fips: 51  # VA
+  output:  # expected results from patched TAXSIM35 2024-05-07 version
+    # va_reduced_itemized_deductions: 37_049.81
+    # va_itemized_deductions: 37_049.81
+    tax_unit_itemizes: true
+    va_income_tax: 18433.05
diff --git a/policyengine_us/variables/gov/states/va/tax/income/deductions/va_reduced_itemized_deductions.py b/policyengine_us/variables/gov/states/va/tax/income/deductions/va_reduced_itemized_deductions.py
@@ -16,15 +16,29 @@ def formula(tax_unit, period, parameters):
         uncapped_state_and_local_tax = tax_unit(
             "state_and_local_sales_or_income_tax", period
         )
-
+        p_salt = parameters(
+            period
+        ).gov.irs.deductions.itemized.salt_and_real_estate
+        filing_status = tax_unit("filing_status", period)
+        real_estate_tax = add(tax_unit, period, ["real_estate_taxes"])
+        state_and_local_tax_cap = p_salt.cap[filing_status]
+        cap_reduced_by_real_estate_tax = max_(
+            state_and_local_tax_cap - real_estate_tax, 0
+        )
+        capped_state_and_local_tax = min_(
+            uncapped_state_and_local_tax, cap_reduced_by_real_estate_tax
+        )
         # Part A: If AGI from federal return is over a certain amount, then
         # limitations to the itemized deduction are applied
         # Line 1 - sum of medical exepens ded., capped state and local tax,
         # interest ded., charitable ded., and casualty loss ded.
-        applicable_ded = add(
-            tax_unit,
-            period,
-            p_va.reduction.applicable,
+        applicable_ded = (
+            add(
+                tax_unit,
+                period,
+                p_va.reduction.applicable,
+            )
+            + capped_state_and_local_tax
         )
         # Line 2 medical expense ded., interest ded., casualty loss ded., and gambling losses
         reducible_ded = add(
@@ -48,7 +62,6 @@ def formula(tax_unit, period, parameters):
         # Line 5 Federal AGI
         federal_agi = tax_unit("adjusted_gross_income", period)
         # Line 6 - applicable amount
-        filing_status = tax_unit("filing_status", period)
         applicable_amount = p_va.applicable_amount[filing_status]
         # Line 7 - excess
         excess = max_(federal_agi - applicable_amount, 0)
@@ -68,12 +81,7 @@ def formula(tax_unit, period, parameters):
             va_itm_deds_adjustment[mask] / excess_ded[mask]
         )
         # Part B Line 13 - capped state and local income tax
-        p_salt = parameters(
-            period
-        ).gov.irs.deductions.itemized.salt_and_real_estate
-        capped_state_and_local_tax = min_(
-            uncapped_state_and_local_tax, p_salt.cap[filing_status]
-        )
+
         # Line 14 - Multiply line 11 by line 13
         state_and_local_tax_adj = (
             capped_state_and_local_tax * adjustment_fraction
