MI 2025 elderly joint 225Kpwages 158Kintrec

[feenberg]

See http://taxsim.nber.org/out2psl/990

Regular tax matches, but PE includes an additional tax I can't identify.

[DTrim99]

The additional $5,094.74 is the Net Investment Income Tax (Form 8960, IRC §1411). With MAGI of $384,072 (MFJ threshold $250,000) and $158,834 of taxable interest, the NIIT base is min($158,834, $134,072) = $134,072, and 3.8% × $134,072 = $5,094.74 — which is exactly the gap between PE's fiitax ($74,638) and the regular tax ($69,543).

PolicyEngine includes NIIT in fiitax (it flows to Form 1040 via Schedule 2) and also reports it separately as the niit output variable in the detailed (idtl=2) output. Does TAXSIM-35 exclude NIIT from fiitax, reporting it only as a separate variable? If so, this is a definitional difference in how the emulator maps fiitax rather than a calculation error.

[PavelMakarchuk]

NIIT (federal): The extra $5,094.74 is indeed the Net Investment Income Tax (Form 8960, §1411), as @DTrim99 noted. But does NBER TAXSIM-35 actually exclude it from fiitax? Running the bundled taxsimtest binary (v20260521) on this exact input returns Federal IIT Liability: 74638.03, which is Federal Regular Tax 69543.29 + Net Investment Income Tax 5094.74. So TAXSIM-35 appears to include NIIT in fiitax, matching PE's $74,638.02 to the penny — i.e. no federal discrepancy here, just NIIT correctly flowing through Schedule 2 in both engines.

Michigan (a separate, smaller gap): While checking this record, the state tax differs — PE siitax ≈ $15,830 vs taxsimtest $14,623. This looks like the Tier 3 Michigan Standard Deduction: both filers turn 67 in 2025 (born 1958). The 2025 MI-1040 instructions (Worksheet 2 / Line 26) extend it to filers born Jan 1, 1953 – Jan 1, 1959 who reach 67 by year-end, and the TaxAct MI-1040 in this bundle subtracts $40,000 − $11,600 exemptions = $28,400 (line 13), giving taxable income $344,072 → tax $14,623. PE's birth-year cutoff stops at 1958 for 2025, so it denies the deduction. Tracked in PolicyEngine/policyengine-us#8633.