ME joint 2025 20Kpwages 10Kswages 28Kintrec 174Kpensions

[feenberg]

See http://taxsim.nber.org/out2psl/927

TA and PE disagree on taxable income. I think TA doesn't allow the pension exclusion because the taxpayers are both young. PE seems to be giving each taxpayer the full exclusion on half the pension income.

[PavelMakarchuk]

Could you help me reconcile the TaxAct value here? Walking through the three engines:

• PE: applies the full ME §5122(2)(M-2) cap of $48,216 per filer with eligible pension. Primary has $174K pension, spouse has $0, so deduction = $48,216. AGI $243K < joint phaseout $250K, so no phaseout.
• TAXSIM-35 binary: doubles to $96,432 ($48,216 × 2), even though only the primary has pension. The 2025 Schedule 1S worksheet header says the spouse column is "to be used only if your spouse separately earned an eligible pension" — does TAXSIM know that?
• TaxAct: Schedule 1S line 15b shows total subtractions of $21,375. The Pension Income Deduction Worksheet (P1) appears to show $48,216 in both columns at y=411, but line 4 ends up at $21,375 somehow.

The $21,375 figure doesn't match any combination I can derive from the worksheet: not the $48,216 cap, not phaseout (AGI is below threshold), not the 2024 cap ($45,864), and no age requirement appears in 36 M.R.S. §5122(2)(M-2). Is there a federal-side limit on Form 1040 line 5b reducing the pension input that TaxAct sees? Or did you choose to model an age limitation in TaxAct that ME's statute doesn't have? A federal 1040 PDF in the bundle would help pin down whether TaxAct's federal taxable-pension differs from the TAXSIM input.

[feenberg]

I think part of the problem with the TA calculation is with the age of the taxpayers, but that isn't everything. I am giving up on TA for this taxpayer and will just try to get taxsim to match PE. Some questions:

1. Does PE care that the oldest taxpayer is only 47? Does PE want to give all the pension to that taxpayer because they are the eoldest? I was splitting the pension unless the oldest was >=65 and the other was <65. I can always give pension income to the oldest if you think that is better.

2. Does PE think pension income is always "normal distribution" and therefore eligible for exclusion? I have been looking at each state for an age limit. It seems that many have a limit, but with exceptions. We could document that pension income is assumed to be eligible for special treatment, regardless of age.

[PavelMakarchuk]

Closing per Dan's resolution to align TAXSIM with PE for this case.