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Fix qualified business income calculation #2785

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Jul 28, 2024
+50 −164
Merged

Fix qualified business income calculation #2785

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a5a54de
Correct AMT taxable income calculation to handle QBID correctly.
martinholmer Jul 27, 2024
beefe6a
Update expected test results given fix to AMT calculations
martinholmer Jul 27, 2024
57b5e18
Simplify QBID threshold gap parameter in policy_current_law.json
martinholmer Jul 27, 2024
b918948
Incorrect change in QBI calculation
martinholmer Jul 28, 2024
5621d50
Minor changes in expected test results given QBI fix
martinholmer Jul 28, 2024
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16 changes: 10 additions & 6 deletions taxcalc/calcfunctions.py
View file
Open in desktop
Original file line number Diff line number Diff line change
Expand Up @@ -1212,7 +1212,7 @@ def StdDed(DSI, earned, STD, age_head, age_spouse, STD_Aged, STD_Dep,


@iterate_jit(nopython=True)
def TaxInc(c00100, standard, c04470, c04600, MARS, e00900, e26270,
def TaxInc(c00100, standard, c04470, c04600, MARS, e00900, c03260, e26270,
e02100, e27200, e00650, c01000, PT_SSTB_income,
PT_binc_w2_wages, PT_ubia_property, PT_qbid_rt,
PT_qbid_taxinc_thd, PT_qbid_taxinc_gap, PT_qbid_w2_wages_rt,
Expand All @@ -1236,6 +1236,8 @@ def TaxInc(c00100, standard, c04470, c04600, MARS, e00900, e26270,
Filing (marital) status. (1=single, 2=joint, 3=separate, 4=household-head, 5=widow(er))
e00900: float
Schedule C business net profit/loss for filing unit
c03260: float
Self-employment (SECA) tax above-the-line deduction
e26270: float
Schedule E: combined partnership and S-corporation net income/loss
e02100: float
Expand Down Expand Up @@ -1287,7 +1289,7 @@ def TaxInc(c00100, standard, c04470, c04600, MARS, e00900, e26270,
pre_qbid_taxinc = max(0., c00100 - max(c04470, standard) - c04600)
# calculate qualified business income deduction
qbided = 0.
qbinc = max(0., e00900 + e26270 + e02100 + e27200)
qbinc = max(0., e00900 - c03260 + e26270 + e02100 + e27200)
if qbinc > 0. and PT_qbid_rt > 0.:
qbid_before_limits = qbinc * PT_qbid_rt
lower_thd = PT_qbid_taxinc_thd[MARS - 1]
Expand Down Expand Up @@ -1906,7 +1908,7 @@ def AGIsurtax(c00100, MARS, AGI_surtax_trt, AGI_surtax_thd, taxbc, surtax):
def AMT(e07300, dwks13, standard, f6251, c00100, c18300, taxbc,
c04470, c17000, c20800, c21040, e24515, MARS, sep, dwks19,
dwks14, c05700, e62900, e00700, dwks10, age_head, age_spouse,
earned, cmbtp,
earned, cmbtp, qbided,
AMT_child_em_c_age, AMT_brk1,
AMT_em, AMT_prt, AMT_rt1, AMT_rt2,
AMT_child_em, AMT_em_ps, AMT_em_pe,
Expand Down Expand Up @@ -1943,7 +1945,7 @@ def AMT(e07300, dwks13, standard, f6251, c00100, c18300, taxbc,
c20800: float
Schedule A: net limited miscellaneous deductions deducted
c21040: float
Itemized deductiosn that are phased out
Itemized deductions that are phased out
e24515: float
Schedule D: Un-Recaptured Section 1250 Gain
MARS: int
Expand All @@ -1970,6 +1972,8 @@ def AMT(e07300, dwks13, standard, f6251, c00100, c18300, taxbc,
Earned income for filing unit
cmbtp: float
Estimate of income on (AMT) Form 6251 but not in AGI
qbided: float
Qualified business income deduction
AMT_child_em_c_age: float
Age ceiling for special AMT exemption
AMT_brk1: float
Expand Down Expand Up @@ -2021,11 +2025,11 @@ def AMT(e07300, dwks13, standard, f6251, c00100, c18300, taxbc,
# pylint: disable=too-many-statements,too-many-branches
# Form 6251, Part I
if standard == 0.0:
c62100 = (c00100 - e00700 - c04470 +
c62100 = (c00100 - e00700 - qbided - c04470 +
max(0., min(c17000, 0.025 * c00100)) +
c18300 + c20800 - c21040)
if standard > 0.0:
c62100 = c00100 - e00700
c62100 = c00100 - e00700 - qbided
c62100 += cmbtp # add income not in AGI but considered income for AMT
if MARS == 3:
amtsepadd = max(0.,
Expand Down
125 changes: 0 additions & 125 deletions taxcalc/policy_current_law.json
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Original file line number Diff line number Diff line change
Expand Up @@ -14701,106 +14701,6 @@
"MARS": "widow",
"value": 1.0
},
{
"year": 2014,
"MARS": "single",
"value": 1.0
},
{
"year": 2014,
"MARS": "mjoint",
"value": 1.0
},
{
"year": 2014,
"MARS": "mseparate",
"value": 1.0
},
{
"year": 2014,
"MARS": "headhh",
"value": 1.0
},
{
"year": 2014,
"MARS": "widow",
"value": 1.0
},
{
"year": 2015,
"MARS": "single",
"value": 1.0
},
{
"year": 2015,
"MARS": "mjoint",
"value": 1.0
},
{
"year": 2015,
"MARS": "mseparate",
"value": 1.0
},
{
"year": 2015,
"MARS": "headhh",
"value": 1.0
},
{
"year": 2015,
"MARS": "widow",
"value": 1.0
},
{
"year": 2016,
"MARS": "single",
"value": 1.0
},
{
"year": 2016,
"MARS": "mjoint",
"value": 1.0
},
{
"year": 2016,
"MARS": "mseparate",
"value": 1.0
},
{
"year": 2016,
"MARS": "headhh",
"value": 1.0
},
{
"year": 2016,
"MARS": "widow",
"value": 1.0
},
{
"year": 2017,
"MARS": "single",
"value": 1.0
},
{
"year": 2017,
"MARS": "mjoint",
"value": 1.0
},
{
"year": 2017,
"MARS": "mseparate",
"value": 1.0
},
{
"year": 2017,
"MARS": "headhh",
"value": 1.0
},
{
"year": 2017,
"MARS": "widow",
"value": 1.0
},
{
"year": 2018,
"MARS": "single",
Expand All @@ -14826,31 +14726,6 @@
"MARS": "widow",
"value": 100000.0
},
{
"year": 2019,
"MARS": "single",
"value": 50000.0
},
{
"year": 2019,
"MARS": "mjoint",
"value": 100000.0
},
{
"year": 2019,
"MARS": "mseparate",
"value": 50000.0
},
{
"year": 2019,
"MARS": "headhh",
"value": 50000.0
},
{
"year": 2019,
"MARS": "widow",
"value": 100000.0
},
{
"year": 2026,
"MARS": "single",
Expand Down
26 changes: 13 additions & 13 deletions taxcalc/tests/cpscsv_agg_expect.csv
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Original file line number Diff line number Diff line change
@@ -1,24 +1,24 @@
,2017,2018,2019,2020,2021,2022,2023,2024,2025,2026
Returns (#m),187.1,199.2,201.9,204.5,207.1,209.7,212.3,214.9,217.5,220.1
AGI ($b),9087.6,10714.8,11167.0,11573.2,13174.9,13543.8,14390.3,15077.5,15785.3,16457.7
Itemizers (#m),62.8,24.0,25.1,27.5,31.2,31.2,29.8,29.4,30.4,81.1
Itemized Deduction ($b),1218.6,613.4,656.3,746.7,863.7,883.2,888.9,915.0,964.2,2180.7
Standard Deduction Filers (#m),124.3,175.3,176.8,176.8,175.7,178.4,182.4,185.4,187.1,139.1
Standard Deduction ($b),1092.1,2949.5,3024.6,3079.1,3090.6,3229.8,3547.8,3805.0,3936.4,1613.3
Itemizers (#m),62.8,23.9,25.0,27.5,31.2,31.2,29.8,29.4,30.4,81.1
Itemized Deduction ($b),1218.6,612.0,655.1,745.4,862.7,881.9,887.6,913.8,963.1,2180.7
Standard Deduction Filers (#m),124.3,175.3,176.9,176.9,175.8,178.5,182.5,185.5,187.2,139.1
Standard Deduction ($b),1092.1,2951.3,3026.1,3080.8,3091.9,3231.4,3549.4,3806.5,3937.8,1613.3
Personal Exemption ($b),1383.6,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,2081.6
Taxable Income ($b),6230.6,7957.8,8321.4,8613.9,10048.2,10330.4,10946.5,11424.4,11988.0,11782.5
Regular Tax ($b),1108.0,1379.8,1448.8,1497.1,1762.5,1837.0,1937.1,2016.1,2122.9,2339.6
AMT Income ($b),8319.8,10261.9,10680.3,11016.8,12528.9,12879.7,13716.5,14379.0,15047.4,15074.1
AMT Liability ($b),8.1,0.8,0.7,0.9,1.9,1.1,1.1,1.0,1.0,17.2
AMT Filers (#m),2.6,0.2,0.2,0.2,0.3,0.2,0.2,0.2,0.2,4.1
Tax before Credits ($b),1116.0,1380.6,1449.5,1498.0,1764.4,1838.1,1938.2,2017.1,2123.8,2356.8
Taxable Income ($b),6230.6,7959.2,8322.8,8615.4,10049.9,10332.2,10948.3,11426.3,11990.0,11782.5
Regular Tax ($b),1108.0,1380.0,1449.0,1497.4,1762.8,1837.4,1937.4,2016.4,2123.2,2339.6
AMT Income ($b),8319.8,10212.6,10630.3,10965.7,12473.9,12821.8,13658.8,14318.8,14984.7,15074.1
AMT Liability ($b),8.1,0.4,0.4,0.5,1.4,0.7,0.7,0.6,0.6,17.2
AMT Filers (#m),2.6,0.1,0.1,0.1,0.2,0.1,0.1,0.1,0.1,4.1
Tax before Credits ($b),1116.0,1380.4,1449.4,1497.9,1764.3,1838.0,1938.1,2017.0,2123.8,2356.8
Refundable Credits ($b),70.8,102.5,102.7,655.0,827.1,98.5,106.4,111.6,112.1,97.7
Nonrefundable Credits ($b),32.7,97.2,99.1,99.2,0.0,107.7,108.3,109.3,111.2,29.9
Nonrefundable Credits ($b),32.7,97.2,99.2,99.2,0.0,107.7,108.3,109.3,111.2,29.9
Reform Surtaxes ($b),0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0
Other Taxes ($b),5.5,10.7,11.3,12.6,13.9,14.4,16.5,17.6,18.8,19.9
Ind Income Tax ($b),1018.1,1191.5,1259.0,756.4,951.1,1646.2,1740.0,1813.7,1919.2,2249.0
Ind Income Tax ($b),1018.1,1191.4,1258.9,756.3,951.0,1646.2,1740.0,1813.7,1919.2,2249.0
Payroll Taxes ($b),1040.8,1141.6,1194.9,1217.9,1318.7,1421.6,1506.7,1582.0,1656.7,1730.7
Combined Liability ($b),2059.0,2333.1,2453.9,1974.3,2269.8,3067.8,3246.7,3395.7,3575.9,3979.7
Combined Liability ($b),2059.0,2333.0,2453.8,1974.2,2269.7,3067.8,3246.6,3395.7,3575.9,3979.7
With Income Tax <= 0 (#m),88.1,96.2,97.0,135.4,127.8,96.1,97.9,99.2,99.6,97.4
With Combined Tax <= 0 (#m),62.8,65.4,66.4,98.2,97.7,67.9,69.3,70.5,71.3,70.7
UBI Benefits ($b),0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0
Expand Down
28 changes: 14 additions & 14 deletions taxcalc/tests/pufcsv_agg_expect.csv
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Original file line number Diff line number Diff line change
@@ -1,24 +1,24 @@
,2017,2018,2019,2020,2021,2022,2023,2024,2025,2026
Returns (#m),190.9,194.3,197.3,200.1,202.9,205.6,208.4,211.2,214.0,216.8
AGI ($b),11078.7,11816.6,12247.2,12722.3,14930.0,14973.9,15955.0,16597.5,17310.2,17852.5
Itemizers (#m),45.7,19.5,20.1,21.1,22.7,22.9,21.7,21.2,21.3,51.9
Itemized Deduction ($b),1274.3,605.3,636.4,694.6,764.2,784.9,789.0,808.3,834.6,2047.9
Standard Deduction Filers (#m),145.2,174.7,177.1,178.4,179.5,182.7,186.7,189.9,192.6,164.8
Standard Deduction ($b),1239.3,2862.1,2951.5,3023.0,3078.3,3231.2,3546.7,3807.7,3963.4,1856.2
Itemizers (#m),45.7,19.4,20.0,21.0,22.6,22.8,21.6,21.1,21.2,51.9
Itemized Deduction ($b),1274.3,602.7,633.9,692.3,761.9,782.7,786.5,805.6,831.9,2047.9
Standard Deduction Filers (#m),145.2,174.8,177.2,178.5,179.6,182.8,186.8,190.0,192.8,164.8
Standard Deduction ($b),1239.3,2865.3,2954.5,3025.8,3081.1,3234.0,3549.8,3811.2,3966.7,1856.2
Personal Exemption ($b),1365.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,1959.2
Taxable Income ($b),8112.2,9178.5,9519.7,9906.4,12002.2,11926.7,12691.5,13123.9,13696.5,13377.8
Regular Tax ($b),1656.8,1712.2,1778.1,1838.2,2281.4,2282.6,2421.6,2488.0,2599.1,2792.6
AMT Income ($b),10512.4,11427.2,11835.2,12265.2,14423.4,14452.5,15424.7,16049.3,16741.5,16934.0
AMT Liability ($b),51.3,23.2,24.1,26.2,29.0,28.6,30.0,31.5,33.0,85.1
AMT Filers (#m),5.7,0.6,0.6,0.6,0.7,0.6,0.6,0.6,0.6,7.4
Tax before Credits ($b),1708.1,1735.4,1802.2,1864.4,2310.4,2311.2,2451.6,2519.4,2632.1,2877.6
Refundable Credits ($b),102.9,117.5,118.5,642.0,802.6,119.2,127.1,133.0,135.2,121.9
Nonrefundable Credits ($b),67.0,127.3,129.2,128.5,47.6,140.8,143.3,144.0,145.9,78.0
Taxable Income ($b),8112.2,9179.2,9520.5,9907.3,12003.2,11927.7,12692.4,13124.8,13697.6,13377.8
Regular Tax ($b),1656.8,1712.3,1778.2,1838.3,2281.5,2282.7,2421.7,2488.0,2599.2,2792.6
AMT Income ($b),10512.4,11343.5,11749.7,12180.1,14330.8,14356.1,15324.3,15944.7,16632.8,16934.0
AMT Liability ($b),51.3,22.1,23.0,25.1,27.8,27.4,28.8,30.3,31.8,85.1
AMT Filers (#m),5.7,0.2,0.2,0.3,0.4,0.3,0.3,0.3,0.3,7.4
Tax before Credits ($b),1708.1,1734.4,1801.1,1863.4,2309.4,2310.1,2450.5,2518.3,2631.0,2877.6
Refundable Credits ($b),102.9,117.5,118.5,642.0,802.6,119.2,127.0,133.0,135.2,121.9
Nonrefundable Credits ($b),67.0,127.3,129.2,128.5,47.6,140.9,143.3,144.0,145.9,78.0
Reform Surtaxes ($b),0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0
Other Taxes ($b),40.0,44.8,43.6,52.9,84.9,61.5,66.5,65.2,66.0,64.2
Ind Income Tax ($b),1578.2,1535.4,1598.1,1146.8,1545.0,2112.7,2247.8,2307.6,2417.0,2742.0
Ind Income Tax ($b),1578.2,1534.3,1597.0,1145.8,1544.0,2111.6,2246.7,2306.5,2415.9,2742.0
Payroll Taxes ($b),1083.8,1133.3,1185.4,1209.0,1306.0,1403.4,1489.3,1563.9,1637.9,1711.0
Combined Liability ($b),2662.0,2668.7,2783.5,2355.8,2851.0,3516.1,3737.1,3871.6,4054.9,4452.9
Combined Liability ($b),2662.0,2667.7,2782.4,2354.8,2850.0,3515.0,3736.0,3870.5,4053.8,4452.9
With Income Tax <= 0 (#m),92.8,98.6,99.7,131.7,125.0,100.3,101.9,103.4,104.4,101.0
With Combined Tax <= 0 (#m),63.4,65.6,66.8,102.1,94.5,68.9,70.2,71.6,72.6,72.4
UBI Benefits ($b),0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0,0.0
Expand Down
17 changes: 12 additions & 5 deletions taxcalc/tests/test_calcfunctions.py
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Original file line number Diff line number Diff line change
Expand Up @@ -560,6 +560,7 @@ def test_EITC(test_tuple, expected_value, skip_jit):
c04600 = [0.00, 0.00, 0.00, 0.00]
MARS = [2, 2, 2, 4]
e00900 = [352000.00, 23000.00, 0.00, 0.00]
c03260 = [13516.17, 1624.90, 0.00, 0.00]
e26270 = [0.00, 0.00, 11000.00, 6000.00]
e02100 = [0.00, 0.00, 0.00, 0.00]
e27200 = [0.00, 0.00, 0.00, 0.00]
Expand All @@ -572,38 +573,44 @@ def test_EITC(test_tuple, expected_value, skip_jit):
qbided = [0.0, 0.0, 0.0, 0.0] # unimportant for function

tuple0 = (
c00100[0], standard[0], c04470[0], c04600[0], MARS[0], e00900[0], e26270[0],
c00100[0], standard[0], c04470[0], c04600[0], MARS[0], e00900[0],
c03260[0], e26270[0],
e02100[0], e27200[0], e00650[0], c01000[0], PT_SSTB_income[0],
PT_binc_w2_wages[0], PT_ubia_property[0], PT_qbid_rt,
PT_qbid_taxinc_thd, PT_qbid_taxinc_gap, PT_qbid_w2_wages_rt,
PT_qbid_alt_w2_wages_rt, PT_qbid_alt_property_rt, c04800[0],
PT_qbid_ps, PT_qbid_prt, qbided[0], PT_qbid_limit_switch)
expected0 = (490860.66, 0)
tuple1 = (
c00100[1], standard[1], c04470[1], c04600[1], MARS[1], e00900[1], e26270[1],
c00100[1], standard[1], c04470[1], c04600[1], MARS[1], e00900[1],
c03260[1], e26270[1],
e02100[1], e27200[1], e00650[1], c01000[1], PT_SSTB_income[1],
PT_binc_w2_wages[1], PT_ubia_property[1], PT_qbid_rt,
PT_qbid_taxinc_thd, PT_qbid_taxinc_gap, PT_qbid_w2_wages_rt,
PT_qbid_alt_w2_wages_rt, PT_qbid_alt_property_rt, c04800[1],
PT_qbid_ps, PT_qbid_prt, qbided[1], PT_qbid_limit_switch)
expected1 = (284075.10, 4600)
expected1 = (284400.08, 4275.02)
tuple2 = (
c00100[2], standard[2], c04470[2], c04600[2], MARS[2], e00900[2], e26270[2],
c00100[2], standard[2], c04470[2], c04600[2], MARS[2], e00900[2],
c03260[2], e26270[2],
e02100[2], e27200[2], e00650[2], c01000[2], PT_SSTB_income[2],
PT_binc_w2_wages[2], PT_ubia_property[2], PT_qbid_rt,
PT_qbid_taxinc_thd, PT_qbid_taxinc_gap, PT_qbid_w2_wages_rt,
PT_qbid_alt_w2_wages_rt, PT_qbid_alt_property_rt, c04800[2],
PT_qbid_ps, PT_qbid_prt, qbided[2], PT_qbid_limit_switch)
expected2 = (579300.00, 0)
tuple3 = (
c00100[3], standard[3], c04470[3], c04600[3], MARS[3], e00900[3], e26270[3],
c00100[3], standard[3], c04470[3], c04600[3], MARS[3], e00900[3],
c03260[3], e26270[3],

e02100[3], e27200[3], e00650[3], c01000[3], PT_SSTB_income[3],
PT_binc_w2_wages[3], PT_ubia_property[3], PT_qbid_rt,
PT_qbid_taxinc_thd, PT_qbid_taxinc_gap, PT_qbid_w2_wages_rt,
PT_qbid_alt_w2_wages_rt, PT_qbid_alt_property_rt, c04800[3],
PT_qbid_ps, PT_qbid_prt, qbided[3], PT_qbid_limit_switch)
expected3 = (57500.00, 1200)


@pytest.mark.parametrize(
'test_tuple,expected_value', [
(tuple0, expected0),
Expand Down
2 changes: 1 addition & 1 deletion taxcalc/tests/test_reforms.py
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Original file line number Diff line number Diff line change
Expand Up @@ -382,4 +382,4 @@ def test_ext_reform(tests_path):
iitax_ext = calc_ext.array('iitax')
rdiff = iitax_ext - iitax_end
weighted_sum_rdiff = (rdiff * calc_end.array('s006')).sum() * 1.0e-9
assert np.allclose([weighted_sum_rdiff], [-224.46], rtol=0.0, atol=0.01)
assert np.allclose([weighted_sum_rdiff], [-224.45], rtol=0.0, atol=0.01)
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