Repository navigation
Encode Hawaii wagering losses and protect them in the total itemized deduction worksheet #1663
Description
Encoding gap
Parity status: queued. Filed by the US + core hub on 2026-10-11 under Max's standing go d1142 (the hub files dispatch-ready pe-parity issues; the Axiom eng hub runs the signed encoder). Each signed-encoder run needs Max's separate approval. PolicyEngine side: PolicyEngine/policyengine-us#10070.
At rulespec-us origin/main 16a6677190, us-hi/policies/income_tax/resident_core_liability_pipeline.yaml:88–90 defers complete itemized deductions. Its rationale at lines 40–41 still cites December 31, 2024 conformity. No wagering output or §235-2.3/§235-2.4 module exists.
Create us-hi/statutes/235-2.3.yaml, us-hi/statutes/235-2.4.yaml and proposed us-hi/policies/income_tax/itemized_deductions.yaml. Preserve unrelated holds.
Corpus
At axiom-corpus origin/main 51bbc7cb6f, existing modules cite us-hi/statute/235-2.3 and /235-2.4. Wave-6 decisions identify §235-2.4 in Chapter 235, and manifests/us-hi-income-tax-w6-forms.yaml:208 records full TY2024 instructions.
manifests/us-hi-2025-n11-capital-gain-worksheet.yaml extracts only PDF p. 35, citation us-hi/form/individual-income-tax/2025/n-11-instructions/capital-gains-tax-worksheet. It does not establish itemized-page coverage.
Extend the TY2025 source to PDF pp. 19 and 34 and locate/ingest Act 35, proposed citation us-hi/statute/session-laws/2026/act-35. Act coverage, R2 bytes, selected release and publication were not verified. Fetch failed on read-only FETCH_HEAD; freshness is unverified.
Sources and dates
2025 N-11 instructions, PDF p. 19:
Gambling losses, but only to the extent of gambling winnings reported on federal Schedule 1
Worksheet A-6 line 30 is outside the 2% floor. Total-itemized worksheet, PDF p. 34, line 2d:
Any gambling and casualty or theft losses included in Worksheet A-6, line 30
Its protected-only branch says:
No. Your deduction is not limited.
The 2024 instructions support the same treatment on PDF pp. 19 and 32.
Act 35 of 2026, PDF p. 2 advances IRC conformity to December 31, 2025. PDF p. 23 makes §165 operative with exceptions that do not disallow subsection (d). PDF p. 35 applies the amendments to taxable years:
beginning after December 31, 2025
Adoption of the 90% allowance is an inference from these provisions and federal §70114, PDF p. 96, rather than a verified final 2026 N-11 worksheet.
Required outputs
Under us-hi:policies/income_tax/itemized_deductions, TaxUnit, Year, Money/USD:
#wagering_losses_itemized_component: full losses capped at gains for TY2024–2025; 90% capped at gains from TY2026.#limited_itemized_deduction_base: max(total minus protected medical, investment-interest, casualty/theft and wagering amounts, zero).#itemized_deductions_after_limitation: total minus the smaller of 80% of that base and 3% of positive Hawaii AGI excess over $166,800, or $83,400 for married filing separately.
Return the full total when protected deductions cover it or AGI is below the threshold. Use taxpayer/spouse return facts, excluding dependents.
Encoder review finding
Encode dated Hawaii conformity and Worksheet A-6 line30, then compose the total-itemized worksheet. Include the section165(d) allowed wagering component outside both the2% floor and overall limitation base. Floor the limited base at zero. Preserve both "deduction is not limited" branches: protected-only totals and AGI at/below threshold return the full total. Act35 incorporates December31,2025 federal law for years beginning after2025; use90% from2026. Exclude dependent-return gambling and preserve unrelated Hawaii holds.
Companion tests
| PE inputs | Expected and arithmetic |
|---|---|
| 2026: wages $200,000; winnings/losses $10,000 each | AGI $210,000; protected losses $9,000; total/allowed deductions $9,000. |
| 2025: same income/gambling; charity $20,000 | Total $30,000; limited base $20,000; reduction min($16,000,3% × $43,200) = $1,296; allowed $28,704. |
| 2025 worksheet: single; total $10,000; wagering allowance $4,000; AGI $266,800 | Reduction min($4,800,$3,000) = $3,000; allowed $7,000. |
| Reused federal dependent case, 2024: parent $10,000/$2,000; dependent $5,000/$9,000 | Parent wagering component $2,000. |
Known limits
PE does not identify professional activity, lottery sources or nonresident transactions. Final 2026 forms and complete liability remain separate source boundaries.
What PolicyEngine does
Repairs policyengine_us/parameters/gov/states/hi/tax/income/deductions/itemized/sources.yaml and policyengine_us/variables/gov/states/hi/tax/income/deductions/itemized/hi_reduced_itemized_deductions.py.
Tests: hi_itemized_deductions.yaml and hi_reduced_itemized_deductions.yaml under policyengine_us/tests/policy/baseline/gov/states/hi/tax/income/deductions/itemized/; dependent numbers reuse federal wagering_losses_deduction.yaml.
Activity