Optimize DC married separate-combined deduction allocation #7297
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DC married couples filing "separately on the same return" can now benefit from optimal deduction allocation. Per DC Schedule S, Calculation J, Line F: "You may allocate this amount as you wish." The optimal strategy allocates all deductions to the higher-earning spouse, who benefits more from each dollar of deduction due to progressive tax rates. This reduces combined tax liability compared to the previous proportional allocation approach. Changes: - Updated dc_deduction_indiv to allocate deductions to higher earner - Updated existing test to reflect optimal allocation behavior - Added test cases for spouse as higher earner and equal AGI scenarios - Added integration test for DC married separate-combined filing Closes #7292 Co-Authored-By: Claude Opus 4.5 <noreply@anthropic.com>
Codecov Report✅ All modified and coverable lines are covered by tests. Additional details and impacted files@@ Coverage Diff @@
## main #7297 +/- ##
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+ Coverage 72.72% 100.00% +27.27%
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Files 3757 1 -3756
Lines 54115 19 -54096
Branches 267 0 -267
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- Hits 39353 19 -39334
+ Misses 14742 0 -14742
+ Partials 20 0 -20
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The dc_deduction_indiv optimization (allocating all deductions to the higher earner) changes the cliff_gap calculation for DC married couples. Updated expected value from 470.47 to 461.5 for the non-earning spouse.
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Summary
DC married couples filing "separately on the same return" can now benefit from optimal deduction allocation. Per DC Schedule S, Calculation J, Line F:
The optimal strategy allocates all deductions to the higher-earning spouse, who benefits more from each dollar of deduction due to progressive tax rates. This reduces combined tax liability compared to the previous proportional allocation approach.
Changes
dc_deduction_indivto allocate deductions to the higher earner instead of proportionally by AGI shareTest
Closes #7292
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