Apply the New York itemized deduction adjustment to IT-196 line 45

changelog.d/ny-itemized-reduction-line-45.fixed.md

@@ -0,0 +1 @@
+Apply the New York itemized deduction adjustment (Tax Law 615(f), IT-196 line 46) to the deduction after the line 40 limitation, including the college tuition itemized deduction.

policyengine_us/tests/policy/baseline/gov/states/ny/tax/income/taxable_income/deductions/itemized/ny_itemized_deductions_higher_incremental_reduction.yaml

@@ -21,3 +21,36 @@
     state_code: NY
   output:
     ny_itemized_deductions_higher_incremental_reduction: 25
+
+- name: Case 3, the higher share uses the base after the line 40 limitation.
+  period: 2021
+  absolute_error_margin: 0.01
+  input:
+    ny_agi: 500_000
+    ny_itemized_deductions_max: 50_000
+    ny_itemized_deductions_phase_out: 640.50
+    charitable_deduction: 0
+    filing_status: SINGLE
+    state_code: NY
+  output:
+    # IT-196 (2021) line 46 Worksheet 4: line 1 = 50,000 - 640.50 = 49,359.50.
+    # Line 2 = min(500,000 - 475,000, 50,000) / 50,000 = 0.5.
+    # Line 3 = 0.25 * 49,359.50 = 12,339.875; higher amount = 0.5 * 12,339.875.
+    ny_itemized_deductions_higher_incremental_reduction: 6_169.9375
+
+- name: Case 4, the higher share base includes the college tuition deduction.
+  period: 2021
+  absolute_error_margin: 0.01
+  input:
+    ny_agi: 500_000
+    ny_itemized_deductions_max: 60_000
+    ny_college_tuition_deduction: 10_000
+    ny_itemized_deductions_phase_out: 640.50
+    charitable_deduction: 0
+    filing_status: SINGLE
+    state_code: NY
+  output:
+    # Tax Law 615(f)(2) uses the deduction allowable under 615(a), with the
+    # 615(d)(4) tuition deduction: base = 60,000 - 640.50 = 59,359.50.
+    # Fraction = 25,000 / 50,000 = 0.5; 0.5 * 0.25 * 59,359.50 = 7,419.9375.
+    ny_itemized_deductions_higher_incremental_reduction: 7_419.9375

policyengine_us/tests/policy/baseline/gov/states/ny/tax/income/taxable_income/deductions/itemized/ny_itemized_deductions_lower_incremental_reduction.yaml

@@ -33,3 +33,55 @@
     state_code: NY
   output:
     ny_itemized_deductions_lower_incremental_reduction: 25
+
+- name: Case 4, the line 46 share uses line 45, after the line 40 limitation.
+  period: 2021
+  absolute_error_margin: 0.01
+  input:
+    ny_agi: 360_200
+    ny_itemized_deductions_max: 50_000
+    ny_itemized_deductions_phase_out: 640.50
+    charitable_deduction: 0
+    filing_status: JOINT
+    state_code: NY
+  output:
+    # IT-196 (2021) line 46 Worksheet 3: line 45 = 50,000 - 640.50 = 49,359.50.
+    # Line 4 = min(360,200 - 200,000, 50,000) = 50,000; line 5 = 1.
+    # Line 6 = 0.25 * 49,359.50 = 12,339.875.
+    ny_itemized_deductions_lower_incremental_reduction: 12_339.875
+
+- name: Case 5, the college tuition deduction is part of the 615(f) base.
+  period: 2021
+  absolute_error_margin: 0.01
+  input:
+    ny_agi: 360_200
+    ny_itemized_deductions_max: 60_000
+    ny_college_tuition_deduction: 10_000
+    charitable_deduction: 0
+    filing_status: JOINT
+    state_code: NY
+  output:
+    # Tax Law 615(f)(1) takes the percentage of the deduction allowable under
+    # 615(a), which includes the 615(d)(4) college tuition deduction (IT-196
+    # line 45 holds it on line 43 for Form IT-203 filers). No federal AGI is
+    # given, so the line 40 limitation does not apply: base = 60,000.
+    # Line 4 = min(360,200 - 200,000, 50,000) = 50,000; line 5 = 1.
+    # Line 6 = 0.25 * 60,000 = 15,000.
+    ny_itemized_deductions_lower_incremental_reduction: 15_000
+
+- name: Case 6, the base includes college tuition and is after the line 40 limitation.
+  period: 2021
+  absolute_error_margin: 0.01
+  input:
+    ny_agi: 360_200
+    ny_itemized_deductions_max: 60_000
+    ny_college_tuition_deduction: 10_000
+    ny_itemized_deductions_phase_out: 640.50
+    charitable_deduction: 0
+    filing_status: JOINT
+    state_code: NY
+  output:
+    # Base = 60,000 - 640.50 = 59,359.50 (tuition 10,000 stays in the base).
+    # Line 5 = min(160,200, 50,000) / 50,000 = 1.
+    # Line 6 = 0.25 * 59,359.50 = 14,839.875.
+    ny_itemized_deductions_lower_incremental_reduction: 14_839.875

policyengine_us/tests/policy/baseline/gov/states/ny/tax/income/taxable_income/deductions/itemized/ny_itemized_deductions_phase_out_integration.yaml

@@ -79,3 +79,167 @@
     # ny_itemized_deductions_max = 50,000 + 25,000 + 10,000 = 85,000 passes
     # through Line 40 untouched (Line 46 still applies on NY AGI 300,000).
     ny_itemized_deductions_phase_out_applies: false
+
+- name: JOINT 2021 - the line 46 adjustment applies to line 45, after the line 40 limitation.
+  period: 2021
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 40
+        taxable_interest_income: 360_200
+        deductible_mortgage_interest: 50_000
+      spouse:
+        age: 40
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        state_sales_tax: 0
+        local_sales_tax: 0
+    marital_units:
+      marital_unit:
+        members: [head, spouse]
+    families:
+      family:
+        members: [head, spouse]
+    spm_units:
+      spm_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: NY
+  output:
+    # Hand computation from the 2021 IT-196 instructions (policyengine-taxsim #1512).
+    # Line 40: 50,000 - min(0.80 * 50,000, 0.03 * (360,200 - 338,850)) = 49,359.50.
+    # Line 46 (Worksheet 3): 0.25 * 49,359.50 = 12,339.875.
+    # Line 47: 49,359.50 - 12,339.875 = 37,019.625.
+    ny_itemized_deductions_phase_out: 640.50
+    ny_itemized_deductions_reduction: 12_339.875
+    ny_itemized_deductions: 37_019.625
+    # IT-201 (2021): taxable income 360,200 - 37,019.625 = 323,180.375 is not
+    # more than 323,200, so Tax computation worksheet 2 applies. NY AGI is
+    # $211,550 or more, so the tax is line 3: 0.0633 * 323,180.375 = 20,457.32.
+    ny_taxable_income: 323_180.375
+
+- name: JOINT 2021 - the line 46 adjustment applies to line 45, after the line 40 limitation, tax before credits.
+  period: 2021
+  # The model adds the rounded $1,056 recapture amount, so it returns about
+  # 0.22 more than the flat 6.33% of line 3.
+  absolute_error_margin: 0.5
+  input:
+    people:
+      head:
+        age: 40
+        taxable_interest_income: 360_200
+        deductible_mortgage_interest: 50_000
+      spouse:
+        age: 40
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        state_sales_tax: 0
+        local_sales_tax: 0
+    marital_units:
+      marital_unit:
+        members: [head, spouse]
+    families:
+      family:
+        members: [head, spouse]
+    spm_units:
+      spm_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: NY
+  output:
+    # IT-201 (2021): taxable income 360,200 - 37,019.625 = 323,180.375 is not
+    # more than 323,200, so Tax computation worksheet 2 applies. NY AGI is
+    # $211,550 or more, so the tax is line 3: 0.0633 * 323,180.375 = 20,457.32.
+    ny_income_tax_before_credits: 20_457.32
+
+- name: JOINT 2021 - the line 46 adjustment base includes the college tuition deduction.
+  period: 2021
+  absolute_error_margin: 0.01
+  input:
+    people:
+      head:
+        age: 40
+        taxable_interest_income: 360_200
+        deductible_mortgage_interest: 50_000
+        qualified_tuition_expenses: 10_000
+      spouse:
+        age: 40
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        state_sales_tax: 0
+        local_sales_tax: 0
+    marital_units:
+      marital_unit:
+        members: [head, spouse]
+    families:
+      family:
+        members: [head, spouse]
+    spm_units:
+      spm_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: NY
+  output:
+    # Tax Law 615(d)(4): tuition deduction = 100% of 10,000 allowable expenses.
+    ny_college_tuition_deduction: 10_000
+    # Line 40: tuition is not on the line 40 worksheet, so the limitation is
+    # min(0.80 * 50,000, 0.03 * (360,200 - 338,850)) = 640.50.
+    ny_itemized_deductions_phase_out: 640.50
+    # Tax Law 615(f)(1): 25% of the deduction allowable under 615(a), which
+    # includes the 615(d)(4) tuition deduction (IT-196 line 45 with line 43):
+    # 0.25 * (50,000 + 10,000 - 640.50) = 0.25 * 59,359.50 = 14,839.875.
+    ny_itemized_deductions_reduction: 14_839.875
+    # 59,359.50 - 14,839.875 = 44,519.625.
+    ny_itemized_deductions: 44_519.625
+    # IT-201 (2021): taxable income 360,200 - 44,519.625 = 315,680.375 is not
+    # more than 323,200, so Tax computation worksheet 2 applies. NY AGI is
+    # $211,550 or more, so the tax is line 3: 0.0633 * 315,680.375 = 19,982.57.
+    ny_taxable_income: 315_680.375
+
+- name: JOINT 2021 - the line 46 adjustment base includes the college tuition deduction, tax before credits.
+  period: 2021
+  # The model adds the rounded $1,056 recapture amount, so it returns about
+  # 0.22 more than the flat 6.33% of line 3.
+  absolute_error_margin: 0.5
+  input:
+    people:
+      head:
+        age: 40
+        taxable_interest_income: 360_200
+        deductible_mortgage_interest: 50_000
+        qualified_tuition_expenses: 10_000
+      spouse:
+        age: 40
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        state_sales_tax: 0
+        local_sales_tax: 0
+    marital_units:
+      marital_unit:
+        members: [head, spouse]
+    families:
+      family:
+        members: [head, spouse]
+    spm_units:
+      spm_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: NY
+  output:
+    # IT-201 (2021): taxable income 360,200 - 44,519.625 = 315,680.375 is not
+    # more than 323,200, so Tax computation worksheet 2 applies. NY AGI is
+    # $211,550 or more, so the tax is line 3: 0.0633 * 315,680.375 = 19,982.57.
+    ny_income_tax_before_credits: 19_982.57

policyengine_us/variables/gov/states/ny/tax/income/taxable_income/deductions/itemized/reduction/based_on_charitable_deduction/incremental/ny_itemized_deductions_higher_incremental_reduction.py

@@ -7,7 +7,11 @@ class ny_itemized_deductions_higher_incremental_reduction(Variable):
     label = "New York itemized deductions higher incremental reduction"
     unit = USD
     definition_period = YEAR
-    reference = "https://www.nysenate.gov/legislation/laws/TAX/615"  # (f)
+    reference = (
+        "https://www.nysenate.gov/legislation/laws/TAX/615",  # (f)
+        "https://www.tax.ny.gov/pdf/2021/inc/it196_2021.pdf#page=3",  # Lines 40-49
+        "https://www.tax.ny.gov/pdf/2021/inc/it196i_2021.pdf#page=20",  # Line 46
+    )
     defined_for = "ny_itemized_deductions_reduction_applies"
 
     def formula(tax_unit, period, parameters):
@@ -18,5 +22,12 @@ def formula(tax_unit, period, parameters):
         agi_excess = max_(agi - p.income_threshold, 0)
         numerator = min_(p.numerator, agi_excess)
         fraction = numerator / p.denominator
-        itemized_deduction = tax_unit("ny_itemized_deductions_max", period)
-        return itemized_deduction * p.rate * fraction
+        # Tax Law 615(f) applies the percentage to the New York itemized
+        # deduction otherwise allowable under 615(a): the pre-TCJA federal
+        # deductions after the line 40 limitation, with the 615(c)-(e)
+        # modifications, including the 615(d)(4) college tuition deduction.
+        # This is IT-196 line 45 for Form IT-203 filers (line 43 tuition).
+        itemized_max = tax_unit("ny_itemized_deductions_max", period)
+        phase_out = tax_unit("ny_itemized_deductions_phase_out", period)
+        base = itemized_max - phase_out
+        return base * p.rate * fraction

policyengine_us/variables/gov/states/ny/tax/income/taxable_income/deductions/itemized/reduction/based_on_charitable_deduction/incremental/ny_itemized_deductions_lower_incremental_reduction.py

@@ -7,7 +7,11 @@ class ny_itemized_deductions_lower_incremental_reduction(Variable):
     label = "New York itemized deductions lower incremental reduction"
     unit = USD
     definition_period = YEAR
-    reference = "https://www.nysenate.gov/legislation/laws/TAX/615"  # (f)
+    reference = (
+        "https://www.nysenate.gov/legislation/laws/TAX/615",  # (f)
+        "https://www.tax.ny.gov/pdf/2021/inc/it196_2021.pdf#page=3",  # Lines 40-49
+        "https://www.tax.ny.gov/pdf/2021/inc/it196i_2021.pdf#page=20",  # Line 46
+    )
     defined_for = "ny_itemized_deductions_reduction_applies"
 
     def formula(tax_unit, period, parameters):
@@ -19,5 +23,12 @@ def formula(tax_unit, period, parameters):
         agi_excess = max_(agi - p.income_threshold[filing_status], 0)
         numerator = min_(p.numerator, agi_excess)
         fraction = numerator / p.denominator
-        itemized_deduction = tax_unit("ny_itemized_deductions_max", period)
-        return itemized_deduction * p.rate * fraction
+        # Tax Law 615(f) applies the percentage to the New York itemized
+        # deduction otherwise allowable under 615(a): the pre-TCJA federal
+        # deductions after the line 40 limitation, with the 615(c)-(e)
+        # modifications, including the 615(d)(4) college tuition deduction.
+        # This is IT-196 line 45 for Form IT-203 filers (line 43 tuition).
+        itemized_max = tax_unit("ny_itemized_deductions_max", period)
+        phase_out = tax_unit("ny_itemized_deductions_phase_out", period)
+        base = itemized_max - phase_out
+        return base * p.rate * fraction

source_conflicts/candidates.yaml

@@ -7807,6 +7807,49 @@ candidates:
   state: ruled
   note: Both credits halve exactly, as the statute says; the tables round for the form. Section 606 authorizes
     nearest-dollar tables only for the real property tax credit.
+- id: us-ny:itemized-deduction-adjustment-college-tuition-base
+  program: income-tax
+  years:
+    from: 2018
+    type: tax
+  question: Does the Tax Law 615(f) itemized deduction adjustment (IT-196 line 46) apply to a base that includes the
+    615(d)(4) college tuition itemized deduction, as 615(a) defines the deduction, or to a base without it, as Form
+    IT-196 lays out lines 45 and 48 for Form IT-201 filers?
+  sources:
+  - kind: statute
+    citation: N.Y. Tax Law 615(a), (d)(4), (f)(1)-(2) and (g)
+    url: https://www.nysenate.gov/legislation/laws/TAX/615
+  - kind: form
+    citation: Form IT-196 (2021), lines 40-49
+    url: https://www.tax.ny.gov/pdf/2021/inc/it196_2021.pdf#page=3
+  - kind: instructions
+    citation: Form IT-196-I (2021), lines 43, 46 and 48 and Worksheets 3 and 4
+    url: https://www.tax.ny.gov/pdf/2021/inc/it196i_2021.pdf#page=20
+  readings:
+    statute: 615(f) takes its percentage of "the New York itemized deduction otherwise allowable under subsection (a)",
+      and 615(a) defines that deduction "with the modifications specified in this section", which include the
+      615(d)(4) college tuition deduction. The base includes tuition, as IT-196 line 45 does for Form IT-203 filers
+      (line 43).
+    other: For Form IT-201 filers, IT-196 adds the college tuition deduction on line 48, after the line 46
+      adjustment, so the line 45 base leaves it out.
+  example: A 2021 joint return with NY AGI $360,200, $50,000 of mortgage interest, a $640.50 line 40 limitation and a
+    $10,000 college tuition deduction has a line 46 adjustment of 0.25 x 59,359.50 = 14,839.875 and a New York itemized
+    deduction of 44,519.625 under the statute, against 12,339.875 and 47,019.625 under the IT-201 form layout.
+  pe_us:
+    follows: statute
+    code:
+    - policyengine_us/variables/gov/states/ny/tax/income/taxable_income/deductions/itemized/reduction/based_on_charitable_deduction/incremental/ny_itemized_deductions_lower_incremental_reduction.py
+    - policyengine_us/variables/gov/states/ny/tax/income/taxable_income/deductions/itemized/reduction/based_on_charitable_deduction/incremental/ny_itemized_deductions_higher_incremental_reduction.py
+    - policyengine_us/variables/gov/states/ny/tax/income/taxable_income/deductions/itemized/ny_itemized_deductions.py
+    prs:
+    - https://github.com/PolicyEngine/policyengine-us/pull/10658
+  state: unreviewed
+  note: The 615(f) base is ny_itemized_deductions_max (which includes ny_college_tuition_deduction) minus the line 40
+    limitation, for every filer. Above NY AGI $1,000,000, ny_itemized_deductions returns only the 615(g) share of the
+    charitable deduction, so the college tuition deduction is not added back, which also follows the statute ("Notwithstanding
+    subsection (a)") over the IT-201 line 48 addition. The model has no IT-201/IT-203 split for this rule. The IT-196
+    line 40-49 layout and the Worksheets 3 and 4 "25% (.25) of line 45" wording are the same on the 2018-2025 forms
+    and instructions checked (forms 2018-2021 and 2025; instructions 2018-2022, 2024 and 2025).
 - id: us-ny:real-property-credit-claimable-spouse
   program: income-tax
   years: