Add 529 plan contribution deductions/credits for AL, DE, ID, IL, IN, IA, KS, LA, ME

[MaxGhenis]

Summary

Implements state 529 plan tax benefits for 9 states, adding deductions or credits that reduce state income tax liability for contributions to qualified education savings plans.

States implemented

State	Benefit type	Single cap	Joint/MFS cap	Notes
AL	Deduction	$5,000	$10,000	Filing-status cap
DE	Subtraction	$1,000	$2,000	Filing-status, with AGI limit
ID	Subtraction	$6,000	$12,000	Filing-status cap
IL	Subtraction	$10,000	$20,000	Filing-status cap
IN	Credit	20% rate	20% rate	Non-refundable, $1,500 MFJ / $750 MFS max
IA	Subtraction	Per-beneficiary	Per-beneficiary	Inflation-adjusted ($6,100 in 2026)
KS	Subtraction	$3,000	$6,000	Per-beneficiary, filing-status cap
LA	Deduction	$2,400	$4,800	Per-beneficiary, filing-status cap
ME	Subtraction	$1,000	$1,000	Per-beneficiary, with AGI limit

Special cases

• Indiana: Implemented as a 20% non-refundable credit, not a deduction/subtraction. Credit is capped at $1,500 for MFJ and $750 for MFS filing status.
• Iowa: Per-beneficiary limit is inflation-adjusted. Uses base amount from IRS guidance.
• Delaware & Maine: Include AGI phase-out limits on the subtraction.

Issues closed

Closes #7522 (AL), #7523 (DE), #7524 (ID), #7525 (IL), #7526 (IN), #7527 (IA), #7528 (KS), #7529 (LA), #7530 (ME)

Test plan

• All new variables have corresponding YAML test cases validating expected behavior
• Test cases cover various filing statuses, income levels, and contribution amounts
• Indiana credit tests verify the 20% rate and per-filing-status caps
• AGI-limited states (DE, ME) have tests at and around threshold boundaries
• Inflation-adjusted states (IA) use correct year-specific values

[codecov]

Codecov Report

❌ Patch coverage is 98.07692% with 3 lines in your changes missing coverage. Please review.
✅ Project coverage is 98.60%. Comparing base (55a0045) to head (f016458).
⚠️ Report is 37 commits behind head on main.

Files with missing lines	Patch %	Lines
.../income/in_income_tax_before_refundable_credits.py	25.00%	3 Missing ⚠️

Additional details and impacted files

@@            Coverage Diff             @@
##             main    #7675      +/-   ##
==========================================
+ Coverage   97.82%   98.60%   +0.77%     
==========================================
  Files           3       14      +11     
  Lines          92      215     +123     
  Branches        2        0       -2     
==========================================
+ Hits           90      212     +122     
- Misses          1        3       +2     
+ Partials        1        0       -1     

Flag	Coverage Δ
unittests	98.60% <98.07%> (+0.77%)	⬆️

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[DTrim99]

PolicyEngine Review: PR #7675

Summary

This PR adds 529 plan contribution tax benefits for 9 states:

• Deductions/Subtractions: AL, DE, ID, IL, IA, KS, LA, ME
• Credit: IN (20% rate, non-refundable)

Validation Results

Validator	Status	Notes
Regulatory Accuracy	✅ Pass	All 9 states verified against official sources
Reference Quality	⚠️ Warnings	Minor reference improvements suggested
Code Patterns	✅ Pass	Proper PolicyEngine patterns used
Test Coverage	✅ Pass	Key scenarios covered

---

✅ Regulatory Verification

All implementations verified correct:

State	Type	Cap	Verified Against
AL	Deduction	$10K MFJ / $5K other	Alabama Code § 16-33C-16
DE	Subtraction	$2K MFJ / $1K other + AGI limit ($200K/$100K)	Delaware Code Title 30 § 1106(b)
ID	Subtraction	$12K MFJ / $6K other	Idaho Tax Commission guidance
IL	Subtraction	$20K MFJ / $10K other	IL DOR FAQ
IN	Credit	20% rate, $1,500 cap ($750 MFS) - raised from $1,000 in 2023	IC 6-3-3-12
IA	Subtraction	Per-beneficiary (inflation-adjusted: $5,500 2024, $5,800 2025, $6,100 2026)	Iowa Code § 422.7(32)
KS	Subtraction	$6K MFJ / $3K other per beneficiary	KS State Treasurer
LA	Deduction	$4,800 MFJ / $2,400 other per beneficiary	LA RS 47:293(9)(a)(xix)
ME	Subtraction	$1K per beneficiary + AGI limit ($200K/$100K)	PL 2021 Ch. 398

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⚠️ Should Address

1. Reference Title Specificity
Several parameter files use vague statute titles that could be more specific:

• al/tax/income/deductions/plan_529/cap.yaml: Consider adding subsection to "Alabama Code Section 16-33C-16"
• de/tax/income/subtractions/plan_529/cap.yaml: "Delaware Code Title 30, Section 1106(b)" could specify subsection
• id/tax/income/subtractions/plan_529/cap.yaml: Reference is to general info page, could benefit from statute citation

2. PDF Page Numbers
NJ-1040 Instructions reference at nj/tax/income/deductions/plan_529_contributions/*.yaml files lacks #page=XX anchor. Consider adding page number for direct navigation.

---

💡 Suggestions (Optional)

1. Delaware Person Entity
de_529_plan_subtraction.py uses entity = Person while most other states use TaxUnit. This appears intentional for Delaware's tax structure but may warrant a brief comment explaining why.

2. Iowa Inflation Adjustments
The Iowa per-beneficiary caps ($5,500→$5,800→$6,100) are nicely documented. Consider adding a reference to the Iowa Treasurer announcement for each year's adjustment.

3. Indiana Non-Refundable Credit Pattern
The implementation in in_income_tax_before_refundable_credits.py correctly uses max_(tax - credit_529, 0) to ensure the credit doesn't exceed tax liability. This is the correct pattern for non-refundable credits. ✅

---

Test Coverage Summary

Tests cover:

• ✅ Under cap scenarios (all states)
• ✅ Over cap scenarios (all states)
• ✅ MFS lower cap (IN)
• ✅ Pre-2023 lower cap (IN - $1,000 vs $1,500)
• ✅ Per-beneficiary caps (IA, KS, LA, ME)
• ✅ AGI income limits (DE, ME)
• ✅ Multiple beneficiaries (IA, KS, LA, ME)
• ✅ No contribution scenarios (all states)

---

Verdict: Approve with minor suggestions

The implementation is regulatory-accurate and follows proper PolicyEngine patterns. The suggestions above are improvements but not blockers.

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