Fix VA spouse tax adjustment by calculating separate VAGI per person

changelog_entry.yaml

@@ -0,0 +1,4 @@
+- bump: minor
+  changes:
+    fixed:
+      - Virginia spouse tax adjustment now correctly calculates eligibility by computing separate VAGI for each person instead of prorating combined VAGI

policyengine_us/tests/policy/baseline/gov/states/va/tax/income/spouse_tax_adjustment/integration.yaml

@@ -0,0 +1,21 @@
+- name: VA Spouse Tax Adjustment - elderly head with low income
+  period: 2024
+  absolute_error_margin: 1
+  input:
+    people:
+      head:
+        age: 75
+        employment_income: 11_752.73
+      spouse:
+        age: 40
+        employment_income: 55_728.48
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+    households:
+      household:
+        members: [head, spouse]
+        state_code: VA
+  output:
+    va_spouse_tax_adjustment: 0  # Head's VAGI less exemptions <= 0, not eligible
+    va_income_tax: 1_402.22  # $1,802.22 - $400 rebate - $0 STA

policyengine_us/tests/policy/baseline/gov/states/va/tax/income/va_agi_person.yaml

@@ -1,37 +1,68 @@
-- name: Attributing the state adjusted gross income based on federal AGI
+# VA AGI for each person is calculated as:
+# Federal AGI + VA additions - VA subtractions (including age deduction)
+# This is the "Separate Virginia Adjusted Gross Income" used in the
+# Spouse Tax Adjustment Worksheet (Form 760 instructions, page 12)
+
+- name: Separate VAGI - two earners without VA subtractions
   period: 2021
   input:
     people:
       person1:
+        age: 40
         adjusted_gross_income_person: 10_000
       person2:
+        age: 40
         adjusted_gross_income_person: 30_000
     tax_units:
       tax_unit:
         members: [person1, person2]
-        va_agi: 30_000
     households:
       household:
         members: [person1, person2]
         state_code: VA
   output:
-    va_agi_person: [7_500, 22_500]
+    # Each person's VA AGI = their federal AGI (no additions/subtractions)
+    va_agi_person: [10_000, 30_000]
 
-- name: One person without income
+- name: Separate VAGI - one person without income
   period: 2021
   input:
     people:
       person1:
+        age: 40
         adjusted_gross_income_person: 10_000
       person2:
+        age: 40
         adjusted_gross_income_person: 0
     tax_units:
       tax_unit:
         members: [person1, person2]
-        va_agi: 8_000
     households:
       household:
         members: [person1, person2]
         state_code: VA
   output:
-    va_agi_person: [8_000, 0]
+    # Person 1 VA AGI = $10K, Person 2 VA AGI = $0
+    va_agi_person: [10_000, 0]
+
+- name: Separate VAGI - elderly with age deduction
+  period: 2021
+  input:
+    people:
+      person1:
+        age: 75
+        adjusted_gross_income_person: 20_000
+      person2:
+        age: 40
+        adjusted_gross_income_person: 30_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: VA
+  output:
+    # Person 1: $20K - $12K age deduction = $8K
+    # Person 2: $30K (no age deduction)
+    va_agi_person: [8_000, 30_000]

policyengine_us/variables/gov/states/va/tax/income/additions/va_additions_person.py

@@ -0,0 +1,22 @@
+from policyengine_us.model_api import *
+
+
+class va_additions_person(Variable):
+    value_type = float
+    entity = Person
+    label = (
+        "Virginia additions to federal adjusted gross income for each person"
+    )
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://law.lis.virginia.gov/vacodefull/title58.1/chapter3/article2/",
+        "https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2022-760-instructions.pdf#page=24",
+    )
+    defined_for = StateCode.VA
+
+    def formula(person, period, parameters):
+        # Currently no person-specific additions are implemented
+        # When additions are added, they should be calculated here
+        # at the person level
+        return 0

policyengine_us/variables/gov/states/va/tax/income/subtractions/age_deduction/va_age_deduction_person.py

@@ -0,0 +1,42 @@
+from policyengine_us.model_api import *
+
+
+class va_age_deduction_person(Variable):
+    value_type = float
+    entity = Person
+    label = "Virginia age deduction for each person"
+    unit = USD
+    definition_period = YEAR
+    reference = "https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2022-760-instructions.pdf#page=16"
+    defined_for = StateCode.VA
+
+    def formula(person, period, parameters):
+        p = parameters(
+            period
+        ).gov.states.va.tax.income.subtractions.age_deduction
+
+        filing_status = person.tax_unit("filing_status", period)
+
+        age = person("age", period)
+        birth_year = period.start.year - age
+
+        agi = person("adjusted_gross_income_person", period)
+
+        # Check if person is eligible for an age deduction
+        eligible = age >= p.age_minimum
+
+        # Check if person is eligible for full deduction (no income limit)
+        eligible_for_full_deduction = (
+            birth_year < p.birth_year_limit_for_full_amount
+        )
+
+        # Calculate the maximum allowable deduction amount per person
+        maximum_allowable_deduction = p.amount * eligible
+
+        # Calculate the amount that the adjusted federal AGI exceeds the threshold
+        excess = max_(agi - p.threshold[filing_status], 0)
+
+        # Reduce by the entire excess, unless eligible for the full deduction
+        reduction = excess * where(eligible_for_full_deduction, 0, 1)
+
+        return max_(maximum_allowable_deduction - reduction, 0)

policyengine_us/variables/gov/states/va/tax/income/subtractions/va_subtractions_person.py

@@ -0,0 +1,27 @@
+from policyengine_us.model_api import *
+
+
+class va_subtractions_person(Variable):
+    value_type = float
+    entity = Person
+    label = "Virginia subtractions from federal adjusted gross income for each person"
+    unit = USD
+    definition_period = YEAR
+    reference = (
+        "https://law.lis.virginia.gov/vacodefull/title58.1/chapter3/article2/",
+        "https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2022-760-instructions.pdf#page=16",
+    )
+    defined_for = StateCode.VA
+
+    def formula(person, period, parameters):
+        # Calculate person-specific subtractions
+        # The main subtraction that varies by person is the age deduction
+        age_deduction = person("va_age_deduction_person", period)
+
+        # Other subtractions (disability, federal employee, military, etc.)
+        # are calculated at the tax unit level by summing person-level amounts
+        # For the purpose of calculating separate VAGI per person, we focus on
+        # the age deduction which is the key subtraction that affects the
+        # spouse tax adjustment calculation
+
+        return age_deduction

policyengine_us/variables/gov/states/va/tax/income/va_agi_person.py

@@ -12,11 +12,19 @@ class va_agi_person(Variable):
     defined_for = StateCode.VA
 
     def formula(person, period, parameters):
-        total_agi = person.tax_unit("va_agi", period)
-        person_agi = person("adjusted_gross_income_person", period)
-        total_federal_agi = person.tax_unit.sum(person_agi)
+        # Calculate separate Virginia AGI for each person
+        # This follows the VA Form 760 Spouse Tax Adjustment Worksheet
+        # which shows "Separate Virginia Adjusted Gross Income" calculation
+        # on page 12 of the instructions
 
-        prorate = np.zeros_like(total_agi)
-        mask = total_federal_agi > 0
-        prorate[mask] = person_agi[mask] / total_federal_agi[mask]
-        return total_agi * prorate
+        # Start with federal AGI for this person
+        federal_agi = person("adjusted_gross_income_person", period)
+
+        # Add Virginia-specific additions for this person
+        va_additions = person("va_additions_person", period)
+
+        # Subtract Virginia-specific subtractions for this person
+        va_subtractions = person("va_subtractions_person", period)
+
+        # Calculate separate VAGI for this person
+        return federal_agi + va_additions - va_subtractions