Arkansas misc and casualty itemized deductions reuse federal deductions that TCJA suspended (zero from 2018) #9614

Summary

Arkansas itemized deductions reuse two federal deductions that Arkansas did not change with TCJA. From 2018 both come out as zero for Arkansas.

1. Miscellaneous deductions subject to the 2% floor. ar_misc_deduction_{joint,indiv} start from the federal misc_deduction, which has already subtracted 2% of federal AGI, and then subtract 2% of Arkansas AGI again.
   • Before 2018, the floor is applied twice.
   • From 2018, misc_deduction is 0 because gov.irs.deductions.itemized.misc.applies is false under TCJA.
   • Arkansas kept the deduction: Form AR3 lines 20-25, "Miscellaneous deductions subject to the 2% AGI limitation", are still in the 2025 instructions (2025_AR1000F_and_AR1000NR_Instructions.pdf#page=21).
2. Casualty and theft losses. sources/{joint,individual}.yaml include the federal casualty_loss_deduction, which is off from 2018 (gov.irs.deductions.itemized.casualty.active) and measured against federal AGI.
   • The 2025 AR3 Line 18 instructions say the loss is computed with "the same as the federal method with the $100 exclusion", and each loss must exceed 10% of adjusted gross income.
   • Nothing in the AR instructions suspends the deduction after 2017.

Reproduction

These probes come from an independent review during #9612:

• One filer, AGI $50,000, unreimbursed employee expenses $10,000. ar_misc_deduction_joint is 8,000 in 2017 (should be 9,000) and 0 in 2022 (should be 9,000).
• AGI $50,000, casualty loss $20,000, 2022. casualty_loss_deduction = 0 and ar_itemized_deductions_joint = 0, where the expected amount is about $14,900 (20,000 − 100 − 5,000).

Fix

• Compute the Arkansas misc deduction from total_misc_deductions minus 2% of Arkansas AGI, without the federal applies switch.
• Add an Arkansas casualty loss deduction: the $100 exclusion per loss, a 10% floor on Arkansas AGI, and no federal active switch.
• Both need the Arkansas conformity citations under Ark. Code § 26-51-4xx, the same way Use Arkansas's own medical expense deduction floor #9612 cites § 26-51-423 for the medical floor.

Other Arkansas gaps noted during the same audit (pre-2021)

• Capital gains exclusion. It was 50% for gains realized January 2015 and 45% for February-December 2015 (LongBookwTaxTables_2015.pdf#page=6). It was 45% for January-June 2016 and 50% for July-December 2016 (LongBookwTaxTables_2016.pdf#page=5). gross_income/capital_gains/exempt/rate.yaml has these dates, but annual evaluation reads January 1, so 2015 uses 50% and 2016 uses 45% for all gains. There are no realization-date inputs, so this is a known limitation rather than a quick fix.
• Low income tax table eligibility. The tables' printed qualifications include "If you use an exemption for military compensation or employment related pension income, you do not qualify" and "If you itemize your deductions, you must use the Regular Tax Table". ar_low_income_tax_joint and ar_uses_low_income_tax_tables do not check either.
• 401(k), 403(b), SEP and Keogh distributions are missing from Arkansas gross income before 2022, while employment_sources exempts them. Arkansas 2018 to 2021 exempts 401(k) and other employer-plan distributions that gross income never included #9580 tracks 2018-2021; through backdating, the same gap covers 2015-2017.

Found while fixing Arkansas 2014-2020 income tax (#9611, #9612).