MaxGhenis · Nov 3, 2026 · Oct 11, 2026 · Nov 2, 2026 · Nov 2, 2026 · Nov 2, 2026
diff --git a/changelog.d/al-misc-deduction-own-floor.fixed.md b/changelog.d/al-misc-deduction-own-floor.fixed.md
@@ -0,0 +1 @@
+Compute Alabama's miscellaneous itemized deduction from its own list of expenses (unreimbursed employee business expenses and tax preparation fees) above 2% of Alabama AGI in every modeled year, counting only the head's and spouse's expenses, instead of applying a second floor to the federal deduction, which is zero from 2018.
diff --git a/policyengine_us/parameters/gov/states/al/tax/income/deductions/itemized/misc_sources.yaml b/policyengine_us/parameters/gov/states/al/tax/income/deductions/itemized/misc_sources.yaml
@@ -0,0 +1,22 @@
+description: Alabama counts these expenses toward the miscellaneous itemized deduction, which applies only above a percentage of Alabama adjusted gross income.
+values:
+  2017-01-01:
+    # Section (a)(1): unreimbursed employee business expenses.
+    - unreimbursed_business_employee_expenses
+    # Section (a)(14): expenses in connection with the determination, collection, or refund of any tax (26 U.S.C. 212(3)).
+    - tax_preparation_fees
+metadata:
+  unit: list
+  period: year
+  label: Alabama miscellaneous itemized deduction sources
+  reference:
+    - title: Code of Alabama Section 40-18-15(a)(1), (14), (23) (2017 edition)
+      href: https://law.justia.com/codes/alabama/2017/title-40/chapter-18/article-1/section-40-18-15/
+    - title: "Act 2026-604, Section 1, amending Code of Alabama Section 40-18-15 #page 2,6-8"
+      href: https://alison.legislature.state.al.us/files/pdf/SearchableInstruments/2026RS/HB527-enr.pdf#page=2
+    - title: "2017 Alabama Form 40 instructions, Schedule A lines 20-24 #page 20-21"
+      href: https://www.revenue.alabama.gov/wp-content/uploads/2021/10/17f40bk.pdf#page=20
+    - title: "2024 Alabama Form 40 instructions, Schedule A lines 20-24 #page 20-21"
+      href: https://www.revenue.alabama.gov/wp-content/uploads/2025/01/24f40bk.pdf#page=20
+    - title: 2025 Alabama Form 40 instructions, Schedule A lines 20-24
+      href: https://www.revenue.alabama.gov/wp-content/uploads/2026/01/25f40bk.pdf#page=21
diff --git a/...us/parameters/gov/states/al/tax/income/deductions/itemized/work_related_expense_rate.yaml b/...us/parameters/gov/states/al/tax/income/deductions/itemized/work_related_expense_rate.yaml
@@ -1,14 +1,18 @@
-description: Alabama deducts work-related expense over this percentage of adjusted gross income.
+description: Alabama allows the total of the subdivision (1) unreimbursed employee business expenses and the subdivision (14) expenses only above this percentage of adjusted gross income.
 values:
-  2021-01-01: 0.02
+  2017-01-01: 0.02
 
 metadata:
-  label: Alabama work-related expense deduction rate
+  label: Alabama miscellaneous itemized deduction floor rate
   period: year
   unit: /1
   reference:
-    - title: Code of Alabama Section 40-18-15, (a) (3) (h) (23)
-      href: https://law.justia.com/codes/alabama/2022/title-40/chapter-18/article-1/section-40-18-15/
+    - title: Code of Alabama Section 40-18-15(a)(23) (2017 edition)
+      href: https://law.justia.com/codes/alabama/2017/title-40/chapter-18/article-1/section-40-18-15/
+    - title: Code of Alabama Section 40-18-15(a)(23) (2021 edition)
+      href: https://law.justia.com/codes/alabama/2021/title-40/chapter-18/article-1/section-40-18-15/
+    - title: "Act 2026-604, Section 1, amending Code of Alabama Section 40-18-15 #page 7-8"
+      href: https://alison.legislature.state.al.us/files/pdf/SearchableInstruments/2026RS/HB527-enr.pdf#page=7
     - title: 2021 Schedule A (Form 1040)
       href: https://www.revenue.alabama.gov/ultraviewer/viewer/basic_viewer/index.html?form=2022/06/21f40schabdc_blk.pdf#page=1
     - title: 2022 Schedule A (Form 1040)
@@ -17,3 +21,9 @@ metadata:
       href: https://www.revenue.alabama.gov/ultraviewer/viewer/basic_viewer/index.html?form=2024/01/23f40schabdc_blk.pdf#page=1
     - title: 2024 Schedule A (Form 1040)
       href: https://www.revenue.alabama.gov/ultraviewer/viewer/basic_viewer/index.html?form=2025/01/24f40schabdc_blk.pdf#page=20
+    - title: "2017 Alabama Form 40 instructions, Schedule A lines 20-24 #page 20-21"
+      href: https://www.revenue.alabama.gov/wp-content/uploads/2021/10/17f40bk.pdf#page=20
+    - title: "2024 Alabama Form 40 instructions, Schedule A lines 20-24 #page 20-21"
+      href: https://www.revenue.alabama.gov/wp-content/uploads/2025/01/24f40bk.pdf#page=20
+    - title: 2025 Alabama Form 40 instructions, Schedule A lines 20-24
+      href: https://www.revenue.alabama.gov/wp-content/uploads/2026/01/25f40bk.pdf#page=21
diff --git a/policyengine_us/tests/core/test_al_agi_dependent_invariants.py b/policyengine_us/tests/core/test_al_agi_dependent_invariants.py
@@ -14,8 +14,9 @@
 with the dependents' income and deduction inputs as drawn and with them set
 to zero. For every tax unit:
 
-1. The dependents' inputs never change Alabama AGI, the standard deduction
-   or the personal and dependent exemptions. Alabama income tax is unchanged
+1. The dependents' inputs never change Alabama AGI, the standard deduction,
+   the personal and dependent exemptions or the miscellaneous itemized
+   deduction. Alabama income tax is unchanged
    too wherever the itemized deductions and the federal income tax deduction
    are. Two leaks outside AGI remain, and are left out here: Alabama
    itemized deductions still count a dependent's FICA and self-employment
@@ -57,24 +58,29 @@
     "rental_income",
     "long_term_capital_gains",
     "taxable_public_pension_income",
+    # Alabama miscellaneous itemized deduction sources.
+    "unreimbursed_business_employee_expenses",
+    "tax_preparation_fees",
 ]
 UNIT_OUTPUTS = [
     "al_agi",
     "al_standard_deduction",
     "al_personal_exemption",
     "al_dependent_exemption",
+    "al_misc_deduction",
     "al_itemized_deductions",
     "al_federal_income_tax_deduction",
     "al_income_tax",
     "tax_unit_dependents",
 ]
-# Outputs that depend on Alabama AGI but not on federal tax or itemized
-# deductions.
+# Outputs that depend on Alabama AGI but not on federal tax, and on no
+# itemized deduction that still leaks a dependent's items (#9941).
 INVARIANT_OUTPUTS = [
     "al_agi",
     "al_standard_deduction",
     "al_personal_exemption",
     "al_dependent_exemption",
+    "al_misc_deduction",
 ]
 
 amount = st.integers(1, 40_000).map(float)
@@ -110,6 +116,8 @@ def person_amounts(draw):
         # A public pension is both in pension income and subtracted from
         # Alabama gross income.
         "taxable_public_pension_income": public_pension,
+        "unreimbursed_business_employee_expenses": draw(small),
+        "tax_preparation_fees": draw(st.integers(0, 1_000).map(float)),
     }
 
 
@@ -156,6 +164,8 @@ def some(low, high, p=0.5):
         "rental_income": some(-5_000, 20_000, 0.3),
         "long_term_capital_gains": some(1, 5_000, 0.3),
         "taxable_public_pension_income": public_pension,
+        "unreimbursed_business_employee_expenses": some(1, 5_000, 0.3),
+        "tax_preparation_fees": some(1, 1_000, 0.3),
     }
 
 

diff --git a/...tests/policy/baseline/gov/states/al/tax/income/deductions/itemized/al_misc_deduction.yaml b/...tests/policy/baseline/gov/states/al/tax/income/deductions/itemized/al_misc_deduction.yaml
@@ -1,20 +1,138 @@
-- name: Alabama work related itemized deductions unit test 1
+# Ala. Code 40-18-15(a)(23) allows the subdivision (1) unreimbursed employee
+# business expenses and the subdivision (14) deduction only to the extent they
+# exceed 2% of Alabama AGI. Alabama applies that one floor to the expenses in
+# every year; it does not start from the federal miscellaneous deduction, which
+# is already net of the federal floor and is zero from 2018.
+
+- name: Case 1, 2021 expenses above 2% of Alabama AGI.
   period: 2021
   input:
-    misc_deduction: 2_000
+    unreimbursed_business_employee_expenses: 2_000
     al_agi: 70_000
     state_code: AL
   output:
+    # 2,000 - 0.02 * 70,000
     al_misc_deduction: 600
-#2000-70000*0.2=600
-
 
-- name: Alabama work related itemized deductions unit test 2
+- name: Case 2, 2021 expenses well above the floor.
   period: 2021
   input:
-    misc_deduction: 7_000
+    unreimbursed_business_employee_expenses: 7_000
     al_agi: 30_000
     state_code: AL
   output:
+    # 7,000 - 0.02 * 30,000
     al_misc_deduction: 6_400
-#7000-30000*0.02=6400
+
+- name: Case 3, 2017 Alabama applies one floor to the expenses, not a second floor to the federal deduction.
+  period: 2017
+  input:
+    unreimbursed_business_employee_expenses: 5_000
+    tax_preparation_fees: 0
+    positive_agi: 50_000
+    al_agi: 50_000
+    state_code: AL
+  output:
+    # Federal and Alabama each allow 5,000 - 0.02 * 50,000 = 4,000. Before the
+    # fix Alabama took a further 1,000 off the federal 4,000.
+    misc_deduction: 4_000
+    al_misc_deduction: 4_000
+
+- name: Case 4, 2017 Alabama floors on Alabama AGI, the federal deduction on federal AGI.
+  period: 2017
+  input:
+    unreimbursed_business_employee_expenses: 5_000
+    positive_agi: 100_000
+    al_agi: 90_000
+    state_code: AL
+  output:
+    # Federal 5,000 - 0.02 * 100,000 = 3,000; Alabama 5,000 - 0.02 * 90,000.
+    misc_deduction: 3_000
+    al_misc_deduction: 3_200
+
+- name: Case 5, 2025 Alabama keeps the deduction the federal return suspends.
+  period: 2025
+  input:
+    unreimbursed_business_employee_expenses: 5_000
+    tax_preparation_fees: 1_000
+    al_agi: 50_000
+    state_code: AL
+  output:
+    misc_deduction: 0
+    # 5,000 + 1,000 - 0.02 * 50,000
+    al_misc_deduction: 5_000
+
+- name: Case 6, 2025 expenses equal to the floor yield no deduction.
+  period: 2025
+  input:
+    unreimbursed_business_employee_expenses: 1_000
+    al_agi: 50_000
+    state_code: AL
+  output:
+    # max(1,000 - 0.02 * 50,000, 0)
+    al_misc_deduction: 0
+
+- name: Case 7, 2025 Alabama adds both spouses' expenses before one floor.
+  period: 2025
+  input:
+    people:
+      head:
+        unreimbursed_business_employee_expenses: 1_500
+      spouse:
+        tax_preparation_fees: 700
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        al_agi: 60_000
+    households:
+      household:
+        members: [head, spouse]
+        state_code: AL
+  output:
+    # 1,500 + 700 - 0.02 * 60,000
+    al_misc_deduction: 1_000
+
+- name: Case 8, 2025 Alabama reads its own expense list, not the federal total.
+  period: 2025
+  input:
+    total_misc_deductions: 5_000
+    al_agi: 50_000
+    state_code: AL
+  output:
+    al_misc_deduction: 0
+
+- name: Case 9, 2025 a tax unit dependent's expenses stay off the filer's Alabama return.
+  period: 2025
+  input:
+    people:
+      head:
+        unreimbursed_business_employee_expenses: 1_500
+      child:
+        age: 17
+        is_tax_unit_dependent: true
+        unreimbursed_business_employee_expenses: 2_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+        al_agi: 50_000
+    households:
+      household:
+        members: [head, child]
+        state_code: AL
+  output:
+    # The child's 2,000 belongs on the child's own return.
+    # 1,500 - 0.02 * 50,000
+    al_misc_deduction: 500
+
+- name: Case 10, 2017 Alabama floors on Alabama AGI even when federal AGI is lower.
+  period: 2017
+  input:
+    unreimbursed_business_employee_expenses: 5_000
+    positive_agi: 40_000
+    al_agi: 50_000
+    state_code: AL
+  output:
+    # Federal: 5,000 - 0.02 * 40,000
+    misc_deduction: 4_200
+    # Alabama: 5,000 - 0.02 * 50,000
+    al_misc_deduction: 4_000
Original file line number	Diff line number	Diff line change
		@@ -0,0 +1 @@
		Compute Alabama's miscellaneous itemized deduction from its own list of expenses (unreimbursed employee business expenses and tax preparation fees) above 2% of Alabama AGI in every modeled year, counting only the head's and spouse's expenses, instead of applying a second floor to the federal deduction, which is zero from 2018.