Add Indiana SB 243 OBBBA tax conformity (tips, overtime, car loan interest)

changelog.d/in-sb243-obbba-conformity.added.md

@@ -0,0 +1 @@
+Indiana SB 243 OBBBA tax conformity: tip income, overtime income, and auto loan interest deductions for tax year 2026.

policyengine_us/parameters/gov/states/in/tax/income/deductions/deductions.yaml

@@ -5,7 +5,7 @@ values:
     - in_homeowners_property_tax_deduction
     - salt_refund_last_year
     - us_govt_interest
-    - tax_unit_taxable_social_security # includes railroad retirement benefits
+    - tax_unit_taxable_social_security  # includes railroad retirement benefits
     - in_military_service_deduction
     - in_nonpublic_school_deduction
     - in_nol
@@ -36,7 +36,65 @@ values:
     # IC 6-3-2-4 (b)
     - military_basic_pay
 
-2024-01-01:
+  2024-01-01:
+    # IC 6-3-2-6
+    - in_renters_deduction
+    # IC 6-1.1
+    - in_homeowners_property_tax_deduction
+    # IC 6-3.1-19-1
+    - salt_refund_last_year
+    # IC 6-8-5-1
+    - us_govt_interest
+    # US Code 26-A-1-B-II-§86
+    - tax_unit_taxable_social_security  # includes railroad retirement benefits
+    # IC 6-3-2-4-(a)(1)
+    - in_military_service_deduction
+    # IC 6-3-2-22-(d)(1)
+    - in_nonpublic_school_deduction
+    # IC 6-3-2-2.5
+    - in_nol
+    # IC 6-3-2-10
+    - in_unemployment_compensation_deduction
+    # IC 6-3-2
+    - in_other_deductions
+    # IC 6-3-2-4 (b)
+    - military_basic_pay
+    # IC 6-3-2-28
+    - in_healthcare_sharing_deduction
+
+  2026-01-01:
+    # IC 6-3-2-6
+    - in_renters_deduction
+    # IC 6-1.1
+    - in_homeowners_property_tax_deduction
+    # IC 6-3.1-19-1
+    - salt_refund_last_year
+    # IC 6-8-5-1
+    - us_govt_interest
+    # US Code 26-A-1-B-II-§86
+    - tax_unit_taxable_social_security  # includes railroad retirement benefits
+    # IC 6-3-2-4-(a)(1)
+    - in_military_service_deduction
+    # IC 6-3-2-22-(d)(1)
+    - in_nonpublic_school_deduction
+    # IC 6-3-2-2.5
+    - in_nol
+    # IC 6-3-2-10
+    - in_unemployment_compensation_deduction
+    # IC 6-3-2
+    - in_other_deductions
+    # IC 6-3-2-4 (b)
+    - military_basic_pay
+    # IC 6-3-2-28
+    - in_healthcare_sharing_deduction
+    # IC 6-3-2-31 (SB 243 OBBBA conformity - 2026 only)
+    - in_tip_income_deduction
+    # IC 6-3-2-32 (SB 243 OBBBA conformity - 2026 only)
+    - in_overtime_income_deduction
+    # IC 6-3-2-33 (SB 243 OBBBA conformity - 2026 only)
+    - in_auto_loan_interest_deduction
+
+  2027-01-01:
     # IC 6-3-2-6
     - in_renters_deduction
     # IC 6-1.1
@@ -59,12 +117,12 @@ values:
     - in_other_deductions
     # IC 6-3-2-4 (b)
     - military_basic_pay
-    # IC 6-3-2-28
+    # IC 6-3-2-28
     - in_healthcare_sharing_deduction
 
-metadata: 
+metadata:
   unit: list
-  Period: year
+  period: year
   label: Indiana Deductions
   reference:
     - title: Indiana General Assembly Legal Code Title 6 Taxation
@@ -73,3 +131,5 @@ metadata:
       href: https://www.law.cornell.edu/uscode/text
     - title: 2025 IT-40 Income Tax Form Instruction Booklet, pg. 8
       href: https://forms.in.gov/Download.aspx?id=16915
+    - title: Indiana SB 243 - OBBBA Tax Conformity (2026)
+      href: https://iga.in.gov/legislative/2026/bills/senate/243

policyengine_us/parameters/gov/states/in/tax/income/deductions/obbba_conformity/auto_loan_interest_deduction_available.yaml

@@ -0,0 +1,15 @@
+description: Indiana provides this deduction for qualified passenger vehicle loan interest under the One Big Beautiful Bill Act conformity program (IC 6-3-2-33).
+values:
+  0001-01-01: false
+  2026-01-01: true
+  2027-01-01: false
+
+metadata:
+  unit: bool
+  period: year
+  label: Indiana auto loan interest deduction available
+  reference:
+    - title: Indiana Code IC 6-3-2-33 - Qualified passenger vehicle loan interest deduction
+      href: https://iga.in.gov/pdf-documents/124/2026/senate/bills/SB0243/SB0243.05.ENRH.pdf#page=52
+    - title: Indiana SB 243 Section 13 - Effective January 1, 2026 (retroactive)
+      href: https://iga.in.gov/legislative/2026/bills/senate/243

policyengine_us/parameters/gov/states/in/tax/income/deductions/obbba_conformity/overtime_income_deduction_available.yaml

@@ -0,0 +1,15 @@
+description: Indiana provides this deduction for qualified overtime compensation under the One Big Beautiful Bill Act conformity program (IC 6-3-2-32).
+values:
+  0001-01-01: false
+  2026-01-01: true
+  2027-01-01: false
+
+metadata:
+  unit: bool
+  period: year
+  label: Indiana overtime income deduction available
+  reference:
+    - title: Indiana Code IC 6-3-2-32 - Qualified overtime compensation deduction
+      href: https://iga.in.gov/pdf-documents/124/2026/senate/bills/SB0243/SB0243.05.ENRH.pdf#page=52
+    - title: Indiana SB 243 Section 12 - Effective January 1, 2026 (retroactive)
+      href: https://iga.in.gov/legislative/2026/bills/senate/243

policyengine_us/parameters/gov/states/in/tax/income/deductions/obbba_conformity/tip_income_deduction_available.yaml

@@ -0,0 +1,15 @@
+description: Indiana provides this deduction for qualified tip income under the One Big Beautiful Bill Act conformity program (IC 6-3-2-31).
+values:
+  0001-01-01: false
+  2026-01-01: true
+  2027-01-01: false
+
+metadata:
+  unit: bool
+  period: year
+  label: Indiana tip income deduction available
+  reference:
+    - title: Indiana Code IC 6-3-2-31 - Qualified tips deduction
+      href: https://iga.in.gov/pdf-documents/124/2026/senate/bills/SB0243/SB0243.05.ENRH.pdf#page=51
+    - title: Indiana SB 243 Section 11 - Effective January 1, 2026 (retroactive)
+      href: https://iga.in.gov/legislative/2026/bills/senate/243

policyengine_us/tests/policy/baseline/gov/states/in/tax/income/deductions/obbba_conformity/in_auto_loan_interest_deduction.yaml

@@ -0,0 +1,35 @@
+- name: Indiana auto loan interest deduction in 2026
+  period: 2026
+  input:
+    state_code: IN
+    auto_loan_interest: 2_000
+    employment_income: 50_000
+  output:
+    in_auto_loan_interest_deduction: 2_000
+
+- name: Indiana auto loan interest deduction not available in 2025
+  period: 2025
+  input:
+    state_code: IN
+    auto_loan_interest: 2_000
+    employment_income: 50_000
+  output:
+    in_auto_loan_interest_deduction: 0
+
+- name: Indiana auto loan interest deduction not available in 2027
+  period: 2027
+  input:
+    state_code: IN
+    auto_loan_interest: 2_000
+    employment_income: 50_000
+  output:
+    in_auto_loan_interest_deduction: 0
+
+- name: Indiana auto loan interest deduction zero with no interest
+  period: 2026
+  input:
+    state_code: IN
+    auto_loan_interest: 0
+    employment_income: 50_000
+  output:
+    in_auto_loan_interest_deduction: 0

policyengine_us/tests/policy/baseline/gov/states/in/tax/income/deductions/obbba_conformity/in_overtime_income_deduction.yaml

@@ -0,0 +1,35 @@
+- name: Indiana overtime income deduction in 2026 with overtime
+  period: 2026
+  input:
+    state_code: IN
+    fsla_overtime_premium: 5_000
+    employment_income: 50_000
+  output:
+    in_overtime_income_deduction: 5_000
+
+- name: Indiana overtime income deduction not available in 2025
+  period: 2025
+  input:
+    state_code: IN
+    fsla_overtime_premium: 5_000
+    employment_income: 50_000
+  output:
+    in_overtime_income_deduction: 0
+
+- name: Indiana overtime income deduction not available in 2027
+  period: 2027
+  input:
+    state_code: IN
+    fsla_overtime_premium: 5_000
+    employment_income: 50_000
+  output:
+    in_overtime_income_deduction: 0
+
+- name: Indiana overtime income deduction zero with no overtime
+  period: 2026
+  input:
+    state_code: IN
+    fsla_overtime_premium: 0
+    employment_income: 50_000
+  output:
+    in_overtime_income_deduction: 0

policyengine_us/tests/policy/baseline/gov/states/in/tax/income/deductions/obbba_conformity/in_tip_income_deduction.yaml

@@ -0,0 +1,47 @@
+- name: Indiana tip income deduction in 2026 with tips
+  period: 2026
+  input:
+    state_code: IN
+    tip_income: 10_000
+    employment_income: 50_000
+  output:
+    in_tip_income_deduction: 10_000
+
+- name: Indiana tip income deduction not available in 2025
+  period: 2025
+  input:
+    state_code: IN
+    tip_income: 10_000
+    employment_income: 50_000
+  output:
+    in_tip_income_deduction: 0
+
+- name: Indiana tip income deduction not available in 2027
+  period: 2027
+  input:
+    state_code: IN
+    tip_income: 10_000
+    employment_income: 50_000
+  output:
+    in_tip_income_deduction: 0
+
+- name: Indiana tip income deduction zero with no tips
+  period: 2026
+  input:
+    state_code: IN
+    tip_income: 0
+    employment_income: 50_000
+  output:
+    in_tip_income_deduction: 0
+
+- name: Integration - OBBBA deductions flow through in_deductions
+  period: 2026
+  absolute_error_margin: 1
+  input:
+    state_code: IN
+    tip_income: 5_000
+    employment_income: 50_000
+  output:
+    in_tip_income_deduction: 5_000
+    # Verify the deduction is included in the Indiana deductions aggregate
+    in_deductions: 5_000

policyengine_us/variables/gov/states/in/tax/income/deductions/obbba_conformity/in_auto_loan_interest_deduction.py

@@ -0,0 +1,23 @@
+from policyengine_us.model_api import *
+
+
+class in_auto_loan_interest_deduction(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Indiana auto loan interest deduction"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://iga.in.gov/pdf-documents/124/2026/senate/bills/SB0243/SB0243.05.ENRH.pdf#page=52",
+        "https://iga.in.gov/legislative/2026/bills/senate/243",
+    )
+    defined_for = StateCode.IN
+
+    def formula(tax_unit, period, parameters):
+        # IC 6-3-2-33(c) requires IN residency (covered by defined_for)
+        # and has spouse attribution rules for joint filers. IC 6-3-2-33(d)
+        # excludes estates/trusts. These are not separately modeled.
+        p = parameters(period).gov.states["in"].tax.income.deductions.obbba_conformity
+        available = p.auto_loan_interest_deduction_available
+        federal_deduction = tax_unit("auto_loan_interest_deduction", period)
+        return available * federal_deduction

policyengine_us/variables/gov/states/in/tax/income/deductions/obbba_conformity/in_overtime_income_deduction.py

@@ -0,0 +1,23 @@
+from policyengine_us.model_api import *
+
+
+class in_overtime_income_deduction(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Indiana overtime income deduction"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://iga.in.gov/pdf-documents/124/2026/senate/bills/SB0243/SB0243.05.ENRH.pdf#page=52",
+        "https://iga.in.gov/legislative/2026/bills/senate/243",
+    )
+    defined_for = StateCode.IN
+
+    def formula(tax_unit, period, parameters):
+        # IC 6-3-2-32(c) contains a proration rule for when overtime is
+        # partially excluded from IN AGI by another provision. No such
+        # provision currently exists, so the full federal amount is used.
+        p = parameters(period).gov.states["in"].tax.income.deductions.obbba_conformity
+        available = p.overtime_income_deduction_available
+        federal_deduction = tax_unit("overtime_income_deduction", period)
+        return available * federal_deduction

policyengine_us/variables/gov/states/in/tax/income/deductions/obbba_conformity/in_tip_income_deduction.py

@@ -0,0 +1,23 @@
+from policyengine_us.model_api import *
+
+
+class in_tip_income_deduction(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Indiana tip income deduction"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://iga.in.gov/pdf-documents/124/2026/senate/bills/SB0243/SB0243.05.ENRH.pdf#page=51",
+        "https://iga.in.gov/legislative/2026/bills/senate/243",
+    )
+    defined_for = StateCode.IN
+
+    def formula(tax_unit, period, parameters):
+        # IC 6-3-2-31(c) contains a proration rule for when tips are
+        # partially excluded from IN AGI by another provision. No such
+        # provision currently exists, so the full federal amount is used.
+        p = parameters(period).gov.states["in"].tax.income.deductions.obbba_conformity
+        available = p.tip_income_deduction_available
+        federal_deduction = tax_unit("tip_income_deduction", period)
+        return available * federal_deduction