Floor Montana's joint-return medical and standard deductions on the return's Montana AGI, and on federal AGI from 2024

changelog.d/fix-mt-medical-floor-joint-agi.fixed.md

@@ -0,0 +1 @@
+Floor Montana's 2021-2023 medical expense deduction and standard deduction on a joint return's own Montana AGI (Form 2, page 1, line 14), so one spouse's loss offsets the other's income, instead of on the sum of each spouse's AGI floored at zero. From 2024, take the federal medical expense deduction (7.5% of federal AGI), because Form 2 line 2 uses federal itemized deductions; the Montana floor had fallen to zero from 2024, so the full medical expense was deducted.

policyengine_us/parameters/gov/states/mt/tax/income/deductions/itemized/state_specific_deduction_applies.yaml

@@ -0,0 +1,16 @@
+description: Montana computes itemized deductions on its own Itemized Deductions Schedule, in lieu of adjusted federal itemized deductions, if this is true.
+metadata:
+  label: Montana state specific itemized deductions apply
+  period: year
+  unit: bool
+  reference:
+    - title: Montana Individual Income Tax Return (Form 2) 2023 | Itemized Deductions Schedule
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2/2023_Montana_Individual_Income_Tax_Return_Form_2.pdf#page=7
+    - title: 2024 Montana Form 2 Instructions | Discontinued Worksheets and Schedules
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2024_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=8
+    - title: 2024 Montana Form 2 Instructions | Line 2 and Worksheet A, Adjusted Federal Itemized Deductions
+      href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2024_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=15
+
+values:
+  2021-01-01: true
+  2024-01-01: false

policyengine_us/tests/policy/baseline/gov/states/mt/tax/income/deductions/itemized/mt_medical_expense_deduction_joint.yaml

@@ -1,21 +1,24 @@
-- name: Amount only distributed to the head 
+- name: Amount only distributed to the head
   period: 2021
   absolute_error_margin: 1
   input:
     people:
       person1:
         is_tax_unit_head: true
         other_medical_expenses: 1_000
-        mt_agi_indiv: 400
       person2:
         is_tax_unit_head: false
         other_medical_expenses: 1_000
-        mt_agi_indiv: 600
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        mt_agi_joint: 1_000
     households:
       household:
         members: [person1, person2]
         state_code: MT
   output:
+    # 2,000 - 7.5% x 1,000 = 1,925
     mt_medical_expense_deduction_joint: [1_925, 0]
 
 - name: No income
@@ -26,11 +29,13 @@
       person1:
         is_tax_unit_head: true
         other_medical_expenses: 1_000
-        mt_agi_indiv: 0
       person2:
         is_tax_unit_head: false
         other_medical_expenses: 1_000
-        mt_agi_indiv: 0
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        mt_agi_joint: 0
     households:
       household:
         members: [person1, person2]
@@ -46,14 +51,110 @@
       person1:
         is_tax_unit_head: true
         other_medical_expenses: 0
-        mt_agi_indiv: 1_000
       person2:
         is_tax_unit_head: false
         other_medical_expenses: 0
-        mt_agi_indiv: 0
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        mt_agi_joint: 1_000
     households:
       household:
         members: [person1, person2]
         state_code: MT
   output:
     mt_medical_expense_deduction_joint: [0, 0]
+
+- name: Spouse's loss reduces the joint return's Montana AGI before the floor
+  period: 2022
+  absolute_error_margin: 1
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 100_000
+        other_medical_expenses: 10_000
+      spouse:
+        age: 40
+        self_employment_income: -20_000
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: MT
+  output:
+    # Form 2 page 1, line 14: 100,000 - 20,000 = 80,000, reported in one column.
+    mt_agi_joint: 80_000
+    # Itemized Deductions Schedule line 1: 10,000 - 7.5% x 80,000 = 4,000.
+    # Flooring each spouse's Montana AGI at zero first would give
+    # 10,000 - 7.5% x 90,000 = 3,250.
+    mt_medical_expense_deduction_joint: [4_000, 0]
+
+- name: Last year of the Montana schedule floors on Montana AGI, not the federal deduction
+  period: 2023
+  absolute_error_margin: 1
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        other_medical_expenses: 10_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+        mt_agi_joint: 40_000
+        medical_expense_deduction: 9_999
+    households:
+      household:
+        members: [person1]
+        state_code: MT
+  output:
+    # 10,000 - 7.5% x 40,000 = 7,000
+    mt_medical_expense_deduction_joint: 7_000
+
+- name: From 2024 the federal medical expense deduction carries through
+  period: 2024
+  absolute_error_margin: 1
+  input:
+    people:
+      person1:
+        is_tax_unit_head: true
+        other_medical_expenses: 10_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+        mt_agi_joint: 50_000
+        medical_expense_deduction: 2_500
+    households:
+      household:
+        members: [person1]
+        state_code: MT
+  output:
+    mt_medical_expense_deduction_joint: 2_500
+
+- name: From 2024 the floor uses federal AGI, not Montana AGI
+  period: 2024
+  absolute_error_margin: 1
+  input:
+    people:
+      person1:
+        age: 70
+        medicare_enrolled: false
+        employment_income: 100_000
+        other_medical_expenses: 10_000
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_code: MT
+  output:
+    # The $5,500 subtraction for taxpayers 65 and older reduces Montana AGI
+    # but not federal AGI.
+    adjusted_gross_income: 100_000
+    mt_agi_joint: 94_500
+    # Form 2 line 2, Worksheet A, takes federal Schedule A:
+    # 10,000 - 7.5% x 100,000 = 2,500.
+    mt_medical_expense_deduction_joint: 2_500

policyengine_us/tests/policy/baseline/gov/states/mt/tax/income/deductions/standard/mt_standard_deduction_joint.yaml

@@ -2,7 +2,7 @@
   period: 2021
   input:
     state_code: MT
-    mt_agi_indiv: 12_950
+    mt_agi_joint: 12_950
     filing_status: SINGLE
   output:
     mt_standard_deduction_joint: 2_590
@@ -11,7 +11,7 @@
   period: 2021
   input:
     state_code: MT
-    mt_agi_indiv: 8_000
+    mt_agi_joint: 8_000
     filing_status: SURVIVING_SPOUSE
   output:
     mt_standard_deduction_joint: 2_140
@@ -20,7 +20,7 @@
   period: 2021
   input:
     state_code: MT
-    mt_agi_indiv: 30_000
+    mt_agi_joint: 30_000
     filing_status: SEPARATE
   output:
     mt_standard_deduction_joint: 4_830
@@ -29,7 +29,7 @@
   period: 2022
   input:
     state_code: MT
-    mt_agi_indiv: 25_180
+    mt_agi_joint: 25_180
     filing_status: HEAD_OF_HOUSEHOLD
   output:
     mt_standard_deduction_joint: 5_036
@@ -38,7 +38,7 @@
   period: 2022
   input:
     state_code: MT
-    mt_agi_indiv: 15_000
+    mt_agi_joint: 15_000
     filing_status: JOINT
   output:
     mt_standard_deduction_joint: 4_520
@@ -50,17 +50,15 @@
     people:
       person1:
         is_tax_unit_head: true
-        mt_agi_indiv: 5_000
       person2:
         is_tax_unit_head: false
-        mt_agi_indiv: 100_000
       person3:
         is_tax_unit_head: false
-        mt_agi_indiv: 0
     tax_units:
       tax_unit:
         members: [person1, person2, person3]
         filing_status: JOINT
+        mt_agi_joint: 105_000
     households:
       household:
         members: [person1, person2, person3]
@@ -75,17 +73,15 @@
     people:
       person1:
         is_tax_unit_head: true
-        mt_agi_indiv: 20_000
       person2:
         is_tax_unit_head: false
-        mt_agi_indiv: 10_000
       person3:
         is_tax_unit_head: false
-        mt_agi_indiv: 0
     tax_units:
       tax_unit:
         members: [person1, person2, person3]
         filing_status: JOINT
+        mt_agi_joint: 30_000
     households:
       household:
         members: [person1, person2, person3]
@@ -97,7 +93,32 @@
   period: 2024
   input:
     state_code: MT
-    mt_agi_indiv: 12_950
+    mt_agi_joint: 12_950
     filing_status: JOINT
   output:
     mt_standard_deduction_joint: 29_200
+
+- name: Spouse's loss reduces the joint return's Montana AGI
+  period: 2022
+  absolute_error_margin: 1
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 50_000
+      spouse:
+        age: 40
+        self_employment_income: -10_000
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: MT
+  output:
+    # Form 2 page 1, line 14: 50,000 - 10,000 = 40,000, reported in one column.
+    mt_agi_joint: 40_000
+    # Standard Deduction Worksheet: 20% x 40,000 = 8,000, between the $4,520
+    # minimum and the $10,180 maximum for a joint return.
+    mt_standard_deduction_joint: [8_000, 0]