CO 2025 HoH 50Kintrec 2depx 30Kproptax 20Kmortgage

[feenberg]

See http://taxsim.nber.org/out2psl/889

PE does uses the standard deduction rather than the itemized deductions totalling 50K.

[DTrim99]

Confirmed.

Federal tax works out the same either way here — the CTC absorbs whatever tax there is — so PE hits a "tie" condition and defers to a state-deduction tiebreaker. CO doesn't have its own deduction system, so PE falls back to the standard deduction.

The numbers:

• TaxAct (itemizes): federal taxable income $351 → CO tax $15 → final CO refund $3,182
• PE (standard): federal taxable income $26,726 → CO tax $1,176 → final CO refund $2,020

PE is short on the CO refund by ~$1,162. The fix is in policyengine-us (tax_unit_itemizes) — when federal tax is tied, the tiebreaker should look at state tax outcomes, not just state deductions, since CO's tax base flows from federal taxable income. Will follow up there.

[PavelMakarchuk]

Verified fixed by policyengine-us#8213 (now merged). Same root cause as #870 — the tied-federal-tax fallback in tax_unit_itemizes.py now correctly falls back to the federal-level itemized > standard comparison. PE now itemizes for this HoH case ($50K itemized > $23,625 HoH std ded), bringing CO taxable income down accordingly.

[feenberg]

Taxsim does the calculation first by minimizing federal tax, and second by imposing a standard deduction. If the latter minimizes the total federal plus state, it is taken. Lately I have not tested allowing the taxpayer to itemize on the state return while taking the standard deduction on the federal return, because I don't think that is allowed by any state. But I haven't really checked and it may be I should return to always checking.

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On Mon, 11 May 2026, David Trimmer wrote: DTrim99 left a comment (PolicyEngine/policyengine-taxsim#889) Confirmed. Federal tax works out the same either way here ? the CTC absorbs whatever tax there is ? so PE hits a "tie" condition and defers to a state-deduction tiebreaker. CO doesn't have its own deduction system, so PE falls back to the standard deduction. The numbers: - TaxAct (itemizes): federal taxable income $351 ? CO tax $15 ? final CO refund $3,182 - PE (standard): federal taxable income $26,726 ? CO tax $1,176 ? final CO refund $2,020 PE is short on the CO refund by ~$1,162. The fix is in `policyengine-us` (`tax_unit_itemizes`) ? when federal tax is tied, the tiebreaker should look at state tax outcomes, not just state deductions, since CO's tax base flows from federal taxable income. Will follow up there. -- Reply to this email directly or view it on GitHub: #889 (comment) You are receiving this because you authored the thread. Message ID: ***@***.***>