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PolicyEngine / policyengine-us

The PolicyEngine US Python package contains a rules engine of the US tax-benefit system, and microdata generation for microsimulation analysis.
https://policyengine.org/us
GNU Affero General Public License v3.0
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Remove unneeded personal_interest_expense variable #4590

Closed martinholmer closed 2 weeks ago

martinholmer commented 1 month ago

The personal_interest_expense variable is not used in any tax or benefit or other calculations, and is, therefore, unnecessary.

MaxGhenis commented 1 month ago

personal_interest_expense is used in non_mortgage_interest which eventually feeds into interest_deduction. @PavelMakarchuk added it in #3507.

martinholmer commented 1 month ago

@MaxGhenis said:

personal_interest_expense is used in non_mortgage_interest which eventually feeds into interest_deduction. @PavelMakarchuk added it in https://github.com/PolicyEngine/policyengine-us/pull/3507.

But why was it added in the first place? As far as I can see, there is no reason to add it. personal_interest_expense is not a deductible expense.

If we include the extraneous personal_interest_expense variable, which is not used directly in any tax or benefit calculations, why don't we go ahead and add variables like waygu_beef_expenses?

martinholmer commented 1 month ago

The inclusion of personal_interest_expense in the interest_expense variable seems to be causing confusion. Personal interest expense (such as credit card interest) is not deductible under federal or state income tax laws, as far as I know. So, using the interest_expense variable to specify deductible interest is incorrect.

Both mortgage_interest and investment_interest_expense are definitely deductible.

martinholmer commented 1 month ago

IRS help topic 505, Interest expense includes the following text:

Types of interest not deductible include personal interest, such as:

  • Interest paid on a loan to purchase a car for personal use.
  • Credit card and installment interest incurred for personal expenses.
  • Points (if you're a seller), service charges, credit investigation fees, and interest relating to tax-exempt income, such as interest to purchase or carry tax-exempt securities.

So, @PavelMakarchuk, why did you add the personal_interest_expense variable in #3507?