MaxGhenis · Oct 4, 2026 · Oct 4, 2026 · Oct 4, 2026 · Oct 6, 2026 · Oct 7, 2026
diff --git a/changelog.d/investment-interest-163d-limit.fixed.md b/changelog.d/investment-interest-163d-limit.fixed.md
@@ -0,0 +1 @@
+Limit itemized investment interest under 26 U.S.C. 163(d) through Form 4952, support explicit carryovers, exclude dependent investments, and align California, New York, Virginia, and Montana deductions, including Montana separate-return limits before 2024. Exclude dependents' specialty capital gains and losses from filers' Schedule D rate worksheets.
diff --git a/policyengine_us/parameters/gov/irs/deductions/itemized/misc/applies.yaml b/policyengine_us/parameters/gov/irs/deductions/itemized/misc/applies.yaml
@@ -4,8 +4,10 @@ metadata:
   period: year
   label: Miscellaneous expense deduction applies
   reference:
-    - title: 26 U.S. Code § 67 - 2-percent floor on miscellaneous itemized deductions (g)
-      href: https://www.law.cornell.edu/uscode/text/26/67#g
+    # P.L. 119-21 section 70110 removed the 2025 sunset and redesignated
+    # former subsection (g) as (h), effective for tax years after 2025.
+    - title: 26 U.S. Code § 67(h) - Disallowance of miscellaneous itemized deductions (P.L. 119-21 section 70110)
+      href: https://www.law.cornell.edu/uscode/text/26/67#h
 values:
   2013-01-01: true
   2018-01-01: false
diff --git a/policyengine_us/parameters/gov/irs/deductions/itemized/misc/sources.yaml b/policyengine_us/parameters/gov/irs/deductions/itemized/misc/sources.yaml
@@ -3,6 +3,7 @@ values:
   2013-01-01:
     - unreimbursed_business_employee_expenses
     - tax_preparation_fees
+    - investment_expenses
 metadata:
   period: year
   unit: list
@@ -12,3 +13,11 @@ metadata:
       href: https://www.law.cornell.edu/uscode/text/26/67
     - title: 2017 Schedule A Instructions
       href: https://www.irs.gov/pub/irs-prior/i1040sca--2017.pdf#page=12
+    # Schedule A line 23 includes investment expenses; these states continue
+    # to use the shared total in years when the federal deduction is disallowed.
+    - title: 2025 Arkansas AR3 instructions, line 21 (investment fees and expenses)
+      href: https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR1000F_and_AR1000NR_Instructions.pdf#page=21
+    - title: 2025 Arkansas AR3, lines 21-25 (other expenses and 2-percent floor)
+      href: https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR3_ItemizedDeduction.pdf
+    - title: 2025 New York IT-196, line 24 (investment expenses)
+      href: https://www.tax.ny.gov/pdf/2025/inc/it196_2025_fill_in.pdf#page=2
diff --git a/...us/parameters/gov/states/ca/tax/income/deductions/itemized/limit/excluded_deductions.yaml b/...us/parameters/gov/states/ca/tax/income/deductions/itemized/limit/excluded_deductions.yaml
@@ -3,7 +3,8 @@ values:
   2021-01-01:
     - medical_expense_deduction
     - casualty_loss_deduction
-    - non_mortgage_interest
+    # Schedule CA limitation worksheet line 2 uses federal Schedule A line 9.
+    - investment_interest_expense_deduction
 
 metadata:
   unit: list

diff --git a/...ngine_us/parameters/gov/states/va/tax/income/deductions/itemized/reduction/reducible.yaml b/...ngine_us/parameters/gov/states/va/tax/income/deductions/itemized/reduction/reducible.yaml
@@ -2,7 +2,8 @@ description: Virginia reduced the applicable itemized deductions by the followin
 values:
   2013-01-01:
     - medical_expense_deduction
-    - investment_interest_expense
+    # Virginia Schedule A line 9 is the investment interest deduction.
+    - investment_interest_expense_deduction
     - gambling_losses
     - casualty_loss_deduction
 metadata:
Original file line number	Diff line number	Diff line change
		@@ -0,0 +1 @@
		Limit itemized investment interest under 26 U.S.C. 163(d) through Form 4952, support explicit carryovers, exclude dependent investments, and align California, New York, Virginia, and Montana deductions, including Montana separate-return limits before 2024. Exclude dependents' specialty capital gains and losses from filers' Schedule D rate worksheets.