§68 limitation base uses an AGI-minus-exemptions proxy instead of taxable income determined without §68

**Versions:** policyengine-us 1.767.3 (source pin `49d19b239a593dbac8920ac6fd80cfe33372343a`), policyengine-core 3.30.3.

**Summary:** Current §68(a) (Pub. L. 119-21) reduces itemized deductions by 2/37 of the **lesser of** the itemized deductions and the amount by which *"taxable income (determined without regard to this section, and increased by such itemized deductions)"* exceeds the top-bracket threshold. `itemized_taxable_income_deductions_reduction` builds that base from an AGI-minus-exemptions proxy that omits other below-the-line deductions.

**Measured 2026 single case:** AGI $700,000; itemized deductions before §68 $50,000; other below-the-line deductions bring taxable income determined without §68 to $550,000. Statutory base: $550,000 + $50,000 = $600,000, which is below the $640,600 single threshold → excess $0 → reduction **$0**, deductions stay **$50,000**.

**Pinned PE path** (`itemized_taxable_income_deductions_reduction.py` @49d19b23):
```text
taxable_income proxy = max(0, AGI − exemptions) = max(0, 700000 − 0) = 700000
excess = max(0, 700000 − 640600) = 59400
lesser = min(50000, 59400) = 50000
reduction = 0.05405405 × 50000 = 2702.70
```
PE returns itemized deductions of **$47,297.30** — the proxy never subtracts the other below-the-line deductions (and correspondingly never needs the itemized add-back), so it exceeds the statutory base whenever any other below-the-line deduction (e.g. QBI) exists.

Statute: 26 USC 68(a)–(b). Found via Axiom Foundation cross-engine validation (`us-itemized-taxable-income-deductions-grid`, case `itemized-68-other-deduction-base`).

*Edited: the original parenthetical misstated the pinned arithmetic — PE does not add the itemized deductions into its proxy; the corrected path above matches the pinned source.*

Start with itemized_taxable_income_deductions_reduction.py at the pinned commit and review the us-itemized-taxable-income-deductions-grid case itemized-68-other-deduction-base. Compare the calculation with 26 USC 68(a)–(b) and the supplied 2026 single example. Done means the other below-the-line deductions are reflected in the statutory base and the example leaves itemized deductions at $50,000.

Written by the indexing model from the issue text.