Summary

Update the Oklahoma individual income tax implementation for tax year 2025. This includes adding 2025 references to all parameters, updating any changed values, and identifying new programs that could be modeled.

Reference Document

Primary Source: 2025 Oklahoma Individual Income Tax Forms and Instructions for Nonresidents and Part-Year Residents (Form 511-NR-Pkt)

Additional 2025 Forms:

• 2025 Form 511-Pkt (Resident Instructions)
• 2025 Form 538-H (Property Tax Credit)
• 2025 Form 538-S (Sales Tax Credit)
• 2025 Form 511-EIC (Earned Income Credit Worksheet)
• 2025 Form 511-CR (Other Credits)

Part 1: Parameter Value Updates

1.1 Pension Subtraction Limit (CRITICAL UPDATE)

File: policyengine_us/parameters/gov/states/ok/tax/income/agi/subtractions/pension_limit.yaml

Current value: $10,000 (since 2021)
New value for 2024+: $20,000

Reference: HB 2020 increased the Oklahoma income tax exemption for retirement benefits from $10,000 to $20,000 beginning in tax year 2024.

Action: Add new entry 2024-01-01: 20_000 and add 2025 Form 511-Pkt reference (page 17)

Part 2: Add 2025 References to All Parameters

All parameters below require adding a 2025 reference entry. Even if values are unchanged, we must document the 2025 source with page numbers.

2.1 Tax Rate Files (5 files)

Each rate file needs 2025 Form 511-NR-Pkt reference (page 38 for tax tables):

2025 Tax Rates (unchanged from 2024):

• Brackets: 0.25%, 0.75%, 1.75%, 2.75%, 3.75%, 4.75%
• Top rate (4.75%) begins at $7,200 (single) / $14,400 (joint)

2.2 Deduction Files (2 files)

2.3 Exemption Files (3 files)

2.4 AGI Subtraction Files (4 files)

2.5 EITC Files (1 file)

Note: Oklahoma EITC is 5% of federal EITC calculated using 2020 federal requirements, refundable since 2022.

2.6 Child/CDCC Credit Files (3 files)

2.7 Property Tax Credit Files (4 files)

Use 2025 Form 538-H for all:

2.8 Sales Tax Credit Files (4 files)

Use 2025 Form 538-S and 511-NR-Pkt:

2.9 Credit List Files (2 files)

Part 3: New Programs to Implement

The following Oklahoma tax credits could be modeled using existing PolicyEngine variables:

3.1 Scholarship-Granting Organization Credit (Form 511-CR)

Description: Credit for contributions to eligible scholarship-granting organizations

• Amount: 50% of contribution (75% if committed for additional year)
• Maximum: $1,000 individual / $2,000 joint / $100,000 business
• Carryover: 3 years
• Reference: 2025 Form 511-CR

Implementation complexity: Medium - requires new input variable for contributions

3.2 Parental Choice Tax Credit for Homeschool Expenses (Form 591-D)

Description: Credit for qualified homeschool expenses

• Amount: Qualified expenses
• Maximum: $1,000 per eligible student per year
• Statewide cap: $5 million annually (starting 2024)
• Reference: Oklahoma Parental Choice Tax Credit Act

Implementation complexity: Medium - requires new input variables for homeschool status and expenses

3.3 Electric Vehicle Credit

Description: One-time income tax credit for new alternative fuel vehicles

• Amount: Up to $5,500 (vehicles at or under 6,000 lbs GVWR)
• Amount: Up to $9,000 (vehicles 6,000-10,000 lbs GVWR)
• Reference: Alternative Fuels Data Center

Implementation complexity: Medium - requires new input variables for vehicle type/weight

3.4 Zero-Emission Facility Credit (Form 511-CR)

Description: Credit for production and sale of electricity from zero-emission facilities

• Reference: 2025 Form 511-CR

Implementation complexity: Low priority - not applicable to most individual filers

Part 4: New Tests for 2025

4.1 Update Existing Test Files

Add 2025 test cases to all existing Oklahoma test files:

• ok_income_tax_before_credits.yaml - Test 2025 tax calculation
• ok_standard_deduction.yaml - Verify 2025 deduction amounts
• ok_exemptions.yaml - Verify 2025 exemption amounts
• ok_pension_subtraction.yaml - Critical: Test new $20,000 limit for 2024+
• ok_military_retirement_exclusion.yaml - Verify 100% exclusion continues
• ok_ptc.yaml - Test 2025 property tax credit
• ok_stc.yaml - Test 2025 sales tax credit

4.2 Critical Test: Pension Subtraction Increase

- name: Oklahoma pension subtraction 2025 - increased limit
  period: 2025
  input:
    people:
      person:
        taxable_pension_income: 25_000
    tax_units:
      tax_unit:
        members: [person]
  output:
    ok_pension_subtraction: 20_000  # New $20,000 limit (was $10,000)

4.3 Integration Test

Add comprehensive 2025 integration test to ok_integration.yaml that tests full tax calculation pipeline.

Part 5: Future Considerations (2026)

The implementation already includes 2026 rate changes from HB 2764:

• Top rate reduced from 4.75% to 4.5%
• Six brackets consolidated to three brackets
• Rate structure: 0%, 2.5%, 3.5%, 4.5%

These are already implemented in the rate files. Verify accuracy when 2026 approaches.

Checklist

Parameter Updates

• Update pension_limit.yaml with $20,000 for 2024+
• Add 2025 references to all 29 parameter files

Documentation

• Verify all page numbers match 2025 forms
• Update any changed values

Tests

• Add 2025 test cases for pension subtraction
• Add 2025 integration test
• Run full test suite

New Programs (Optional)

• Evaluate priority of new credit implementations
• Create issues for high-priority credits