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Apply the TCJA mortgage interest deduction limits #5129

Merged
merged 11 commits into from
Dec 4, 2024
4 changes: 4 additions & 0 deletions changelog_entry.yaml
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- bump: minor
changes:
added:
- Apply the TCJA mortgage value limits under the mortgage interest deduction.
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description: IRS limits the total home mortgage interest deduction to this amount, based on filing status.
description: The IRS allows an itemized deduction for interest paid on mortgages up to this amount, based on filing status.
SINGLE:
2018-01-01: 1_000_000
2017-01-01: 1_000_000
2018-01-01: 750_000
2026-01-01: 1_000_000
JOINT:
2018-01-01: 1_000_000
2017-01-01: 1_000_000
2018-01-01: 750_000
2026-01-01: 1_000_000
SEPARATE:
2018-01-01: 500_000
2017-01-01: 500_000
2018-01-01: 375_000
2026-01-01: 500_000
HEAD_OF_HOUSEHOLD:
2018-01-01: 1_000_000
2017-01-01: 1_000_000
2018-01-01: 750_000
2026-01-01: 1_000_000
SURVIVING_SPOUSE:
2018-01-01: 1_000_000
2017-01-01: 1_000_000
2018-01-01: 750_000
2026-01-01: 1_000_000
metadata:
breakdown: filing_status
unit: currency-USD
label: IRS home mortgage interest deduction amount cap
period: year
label: IRS home mortgage value cap
reference:
# Hawaii applies this AGI threshold in the state itemized deductions computation
- title: Hawaii Income Tax Law, Chapter 235, Section 235-2.4, (j)(3)
href: https://files.hawaii.gov/tax/legal/hrs/hrs_235.pdf#page=10
- title: 26 U.S. Code § 163 - Interest, (h)(3)(F)
# TCJA adjustemnts described in (h)(3)(F)(i)(II)
- title: 26 U.S. Code § 163 - Interest, (h)(3)(b)(ii)
href: https://www.law.cornell.edu/uscode/text/26/163
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taxable_private_pension_income: 4000
social_security_retirement: 12000
real_estate_taxes: 2000
mortgage_interest: 1000
deductable_mortgage_interest: 1000
self_employment_income: 121010
business_is_qualified: true
business_is_sstb: false
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rental_income: 1005
taxable_private_pension_income: 2500
real_estate_taxes: 4000
mortgage_interest: 36000
deductable_mortgage_interest: 36000
self_employment_income: 127010
business_is_qualified: true
business_is_sstb: false
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person1:
age: 50
employment_income: 80_000
mortgage_interest: 3_000
deductable_mortgage_interest: 3_000
person2:
age: 50
employment_income: 20_000
mortgage_interest: 3_000
deductable_mortgage_interest: 3_000
tax_units:
tax_unit:
members: [person1, person2]
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period: 2021
input:
real_estate_taxes: 12_000
mortgage_interest: 36_000
deductable_mortgage_interest: 36_000
state_fips: 28 # MS
output: # expected results from filling out 2021 MS form 80-108
ms_itemized_deductions_unit: 46_000
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filing_status: JOINT
adjusted_gross_income: 364_695
state_and_local_sales_or_income_tax: 19_956
mortgage_interest: 36_000
deductable_mortgage_interest: 36_000
state_code: VA
output:
va_reduced_itemized_deductions: 35_282
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long_term_capital_gains: 1005.0
rental_income: 2505.0
real_estate_taxes: 24000
mortgage_interest: 14000
deductable_mortgage_interest: 14000
self_employment_income: 141010
business_is_qualified: true
business_is_sstb: false
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from policyengine_us.model_api import *


class deductable_mortgage_interest(Variable):
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value_type = float
entity = Person
label = "Deductable mortgage interest"
documentation = "Under the interest deduction, the US caps the mortgage value to which interest is applied which based on the year of purchase not tax year."
unit = USD
definition_period = YEAR

# This is a placeholder variable until we can implement the full mortgage interest deduction logic
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Expand Up @@ -7,4 +7,5 @@ class interest_expense(Variable):
label = "Interest paid on all loans"
unit = USD
definition_period = YEAR
adds = ["mortgage_interest", "non_mortgage_interest"]

adds = ["deductable_mortgage_interest", "non_mortgage_interest"]
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