Reduce the itemized deductions in Idaho by the SALT amount

changelog_entry.yaml

@@ -0,0 +1,4 @@
+- bump: patch
+  changes:
+    fixed:
+    - Reduce the itemized deductions in Idaho by the SALT amount.

policyengine_us/tests/policy/baseline/gov/states/id/tax/income/id_deductions.yaml

@@ -1,7 +1,7 @@
 - name: Itemizes
   period: 2023
   input:
-    itemized_deductions_less_salt: 1_000
+    id_itemized_deductions: 1_000
     standard_deduction: 500
     state_code: ID
   output:
@@ -10,7 +10,7 @@
 - name: Does not itemize
   period: 2023
   input:
-    itemized_deductions_less_salt: 500
+    id_itemized_deductions: 500
     standard_deduction: 1_000
     state_code: ID
   output:

policyengine_us/tests/policy/baseline/gov/states/id/tax/income/id_itemized_deductions.yaml

@@ -0,0 +1,17 @@
+- name: Itemized deductions over ID salt
+  period: 2023
+  input:
+    id_salt_deduction: 1_000
+    itemized_taxable_income_deductions: 1_600
+    state_code: ID
+  output:
+    id_itemized_deductions: 600
+
+- name: Itemized deductions under ID salt
+  period: 2023
+  input:
+    id_salt_deduction: 2_000
+    itemized_taxable_income_deductions: 1_600
+    state_code: ID
+  output:
+    id_itemized_deductions: 0

policyengine_us/tests/policy/baseline/gov/states/id/tax/income/id_salt_deduction.yaml

@@ -0,0 +1,39 @@
+- name: SALT and real estate tax under cap, joint
+  period: 2023
+  input:
+    state_and_local_sales_or_income_tax: 8_000
+    real_estate_taxes: 1_600
+    filing_status: JOINT
+    state_code: ID
+  output:
+    id_salt_deduction: 8_000
+
+- name: SALT and real estate tax over cap, joint
+  period: 2023
+  input:
+    state_and_local_sales_or_income_tax: 8_000
+    real_estate_taxes: 2_600
+    filing_status: JOINT
+    state_code: ID
+  output:
+    id_salt_deduction: 7_400
+
+- name: Capped at 0
+  period: 2023
+  input:
+    state_and_local_sales_or_income_tax: 8_000
+    real_estate_taxes: 10_100
+    filing_status: JOINT
+    state_code: ID
+  output:
+    id_salt_deduction: 0
+
+- name: SALT and real estate tax over cap, separate
+  period: 2023
+  input:
+    state_and_local_sales_or_income_tax: 8_000
+    real_estate_taxes: 1_600
+    filing_status: SEPARATE
+    state_code: ID
+  output:
+    id_salt_deduction: 3_400

policyengine_us/tests/policy/baseline/gov/states/id/tax/income/integration.yaml

@@ -90,3 +90,49 @@
         state_fips: 16  # ID
   output:  # expected results from patched TAXSIM35 2024-02-19 version
     id_income_tax: 23411.29
+
+- name: Tax unit with taxsimid 58820 in k21.its.csv and k21.ots.csv
+  absolute_error_margin: 0.01
+  period: 2021
+  input:
+    people:
+      person1:
+        age: 56
+        employment_income: 110010
+        qualified_dividend_income: 1005
+        taxable_interest_income: 5505
+        short_term_capital_gains: 3505
+        long_term_capital_gains: 1505
+        rental_income: 1005
+        taxable_private_pension_income: 2500
+        real_estate_taxes: 4000
+        mortgage_interest: 36000
+        self_employment_income: 127010
+        business_is_qualified: true
+        business_is_sstb: false
+        w2_wages_from_qualified_business: 100e6
+      person2:
+        age: 56
+        employment_income: 141010
+        qualified_dividend_income: 1005
+        taxable_interest_income: 5505
+        short_term_capital_gains: 3505
+        long_term_capital_gains: 1505
+        rental_income: 1005
+        taxable_private_pension_income: 2500
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        tax_unit_itemizes: True
+        state_income_tax: 21664.05
+    spm_units:
+      spm_unit:
+        members: [person1, person2]
+        snap: 0  # not in TAXSIM35
+        tanf: 0  # not in TAXSIM35
+    households:
+      household:
+        members: [person1, person2]
+        state_fips: 16  # ID
+  output:  # expected results from patched TAXSIM35 2024-03-17 version
+    id_income_tax: 21404.06

policyengine_us/variables/gov/states/id/tax/income/deductions/id_deductions.py

@@ -14,7 +14,7 @@ class id_deductions(Variable):
     defined_for = StateCode.ID
 
     def formula(tax_unit, period, parameters):
-        itm_ded = tax_unit("itemized_deductions_less_salt", period)
+        itm_ded = tax_unit("id_itemized_deductions", period)
         std_ded = tax_unit("standard_deduction", period)
         # We do not model qualified business income deduction for Idaho
         return max_(itm_ded, std_ded)

policyengine_us/variables/gov/states/id/tax/income/deductions/id_itemized_deductions.py

@@ -0,0 +1,21 @@
+from policyengine_us.model_api import *
+
+
+class id_itemized_deductions(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Idaho itemized deductions"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://tax.idaho.gov/wp-content/uploads/forms/EIN00046/EIN00046_03-01-2023.pdf#page=8",
+        "https://tax.idaho.gov/wp-content/uploads/forms/EFO00089/EFO00089_09-23-2021.pdf",
+    )
+    defined_for = StateCode.ID
+
+    def formula(tax_unit, period, parameters):
+        # Idaho reduces the federal itemized deductions
+        # by the amount of the SALT deduction
+        id_salt_ded = tax_unit("id_salt_deduction", period)
+        itemized_ded = tax_unit("itemized_taxable_income_deductions", period)
+        return max_(itemized_ded - id_salt_ded, 0)

policyengine_us/variables/gov/states/id/tax/income/deductions/id_salt_deduction.py

@@ -0,0 +1,28 @@
+from policyengine_us.model_api import *
+
+
+class id_salt_deduction(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Idaho SALT deduction"
+    unit = USD
+    definition_period = YEAR
+    reference = "https://tax.idaho.gov/wp-content/uploads/forms/EIN00046/EIN00046_03-01-2023.pdf#page=8"
+    defined_for = StateCode.ID
+
+    def formula(tax_unit, period, parameters):
+        state_and_local_tax = tax_unit(
+            "state_and_local_sales_or_income_tax", period
+        )
+        # If the salt amount is above the federal cap, Idaho applies separate limitations
+        filing_status = tax_unit("filing_status", period)
+        cap = parameters(
+            period
+        ).gov.irs.deductions.itemized.salt_and_real_estate.cap[filing_status]
+        # Federal Schedule A line 5b - State and local real estate taxes
+        # Federal Schedule A line 5c - State and local personal property taxes
+        real_estate_taxes = add(tax_unit, period, ["real_estate_taxes"])
+        salt_and_real_estate_tax = state_and_local_tax + real_estate_taxes
+        salt_above_cap = salt_and_real_estate_tax > cap
+        reduced_cap = max_(cap - real_estate_taxes, 0)
+        return where(salt_above_cap, reduced_cap, state_and_local_tax)