Let farm, partnership and S corporation plans set the self-employed health insurance limit

changelog.d/sehi-plan-business-base.fixed.md

@@ -0,0 +1 @@
+Let the self-employed health insurance deduction's earned income limit come from a Schedule F farm, a partnership's K-1 box 14 code A earnings, or a more-than-2% S corporation shareholder's wages when the plan is established under that business (26 U.S.C. 162(l)(2)(A) and (l)(5), Form 7206); the business can be named, and otherwise the person's business with the largest earned income is used.

policyengine_us/tests/policy/baseline/gov/irs/income/taxable_income/adjusted_gross_income/above_the_line_deductions/self_employed_health_insurance_ald.yaml

@@ -100,3 +100,55 @@
     health_insurance_premiums: 3_000
   output:
     self_employed_health_insurance_ald_person: 0
+
+- name: Case 7, a farmer whose plan is established under the farm deducts up to farm earned income.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    is_self_employed: true
+    farm_operations_income: 20_000
+    health_insurance_premiums: 25_000
+  output:
+    # Form 7206: line 3 is 25,000; line 13 is 20,000 - 1,412.955.
+    self_employed_health_insurance_ald_person: 18_587.045
+    # 20,000 - 1,412.955 - 18,587.045.
+    adjusted_gross_income: 0
+
+- name: Case 8, a partner deducts up to their K-1 box 14 code A earnings less half of self-employment tax.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    is_self_employed: true
+    partnership_income: 30_000
+    partnership_self_employment_net_earnings: 30_000
+    health_insurance_premiums: 40_000
+  output:
+    # Form 7206 line 13: 30,000 - 2,119.4325.
+    self_employed_health_insurance_ald_person: 27_880.5675
+    adjusted_gross_income: 0
+
+- name: Case 9, an S corporation shareholder deducts up to their wages from the corporation.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    is_self_employed: true
+    employment_income: 10_000
+    s_corp_shareholder_medicare_wages: 10_000
+    health_insurance_premiums: 12_000
+  output:
+    # Form 7206: line 3 is 12,000; line 13 is line 11, 10,000.
+    self_employed_health_insurance_ald_person: 10_000
+    adjusted_gross_income: 0
+
+- name: Case 10, a plan named under the smaller farm is limited to the farm's earned income.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    is_self_employed: true
+    self_employment_income: 30_000
+    farm_operations_income: 10_000
+    self_employed_health_insurance_plan_business: SCHEDULE_F
+    health_insurance_premiums: 20_000
+  output:
+    # Form 7206 line 13: 10,000 - 0.25 x 2,825.91.
+    self_employed_health_insurance_ald_person: 9_293.5225

policyengine_us/tests/policy/baseline/gov/irs/income/taxable_income/adjusted_gross_income/above_the_line_deductions/self_employed_health_insurance_earned_income_limit.yaml

@@ -1,6 +1,10 @@
 # Form 7206 lines 4-13 (Pub. 535 Worksheet 6-A before 2023). Expected values
 # are hand-computed from the form: the deductible part of self-employment tax
 # is net profit x 0.9235 x 15.3% / 2 below the Social Security wage base.
+# One Form 7206 per plan: the limit is the earned income of the business under
+# which the plan is established (self_employed_health_insurance_plan_business),
+# or of the person's business with the largest earned income when that input
+# is not supplied.
 
 - name: Case 1, one business, the limit is net profit less half of self-employment tax.
   period: 2022
@@ -85,11 +89,119 @@
     self_employment_tax_ald_person: 0
     self_employed_health_insurance_earned_income_limit: 400
 
-- name: Case 8, a Schedule C loss leaves no limit.
+- name: Case 8, a plan established under a Schedule C business with a loss has no limit.
   period: 2025
   absolute_error_margin: 0.01
   input:
     self_employment_income: -5_000
     partnership_self_employment_net_earnings: 20_000
+    self_employed_health_insurance_plan_business: SCHEDULE_C
   output:
     self_employed_health_insurance_earned_income_limit: 0
+
+- name: Case 9, a Schedule C loss leaves the partnership as the plan business.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    self_employment_income: -5_000
+    partnership_self_employment_net_earnings: 20_000
+  output:
+    # Line 15: (20,000 - 5,000) x 0.9235 x 0.153 / 2 = 1,059.71625.
+    self_employment_tax_ald_person: 1_059.71625
+    # Line 5 leaves out the loss, so line 6 is 1: 20,000 - 1,059.71625.
+    self_employed_health_insurance_earned_income_limit: 18_940.28375
+
+- name: Case 10, a farm is the only business.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    farm_operations_income: 20_000
+  output:
+    # Line 15: 20,000 x 0.9235 x 0.153 / 2 = 1,412.955.
+    self_employment_tax_ald_person: 1_412.955
+    # Lines 4 to 8 for Schedule F: 20,000 - 1,412.955.
+    self_employed_health_insurance_earned_income_limit: 18_587.045
+
+- name: Case 11, a partnership with K-1 box 14 code A earnings is the only business.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    partnership_self_employment_net_earnings: 30_000
+  output:
+    # Line 15: 30,000 x 0.9235 x 0.153 / 2 = 2,119.4325.
+    self_employment_tax_ald_person: 2_119.4325
+    self_employed_health_insurance_earned_income_limit: 27_880.5675
+
+- name: Case 12, without a named business the larger farm is the plan business.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    self_employment_income: 5_000
+    farm_operations_income: 40_000
+  output:
+    # Line 15: 45,000 x 0.9235 x 0.153 / 2 = 3,179.14875.
+    self_employment_tax_ald_person: 3_179.14875
+    # Farm: 40,000 - 40,000 / 45,000 x 3,179.14875 = 37,174.09.
+    # Schedule C: 5,000 - 5,000 / 45,000 x 3,179.14875 = 4,646.76125.
+    self_employed_health_insurance_earned_income_limit: 37_174.09
+
+- name: Case 13, a named Schedule C business sets the limit even when the farm earns more.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    self_employment_income: 5_000
+    farm_operations_income: 40_000
+    self_employed_health_insurance_plan_business: SCHEDULE_C
+  output:
+    self_employed_health_insurance_earned_income_limit: 4_646.76125
+
+- name: Case 14, a named farm business takes its own share of the self-employment tax deduction.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    self_employment_income: 30_000
+    farm_operations_income: 10_000
+    self_employed_health_insurance_plan_business: SCHEDULE_F
+  output:
+    # Line 15: 40,000 x 0.9235 x 0.153 / 2 = 2,825.91.
+    # Lines 5 to 8: 10,000 / 40,000 = 0.25; 10,000 - 0.25 x 2,825.91.
+    self_employed_health_insurance_earned_income_limit: 9_293.5225
+
+- name: Case 15, the plan deduction is attributable to Schedule C, so the partnership earns more.
+  period: 2023
+  absolute_error_margin: 0.01
+  input:
+    self_employment_income: 20_000
+    self_employed_pension_contributions_desired: 15_000
+    partnership_self_employment_net_earnings: 10_000
+  output:
+    # Line 15: 30,000 x 0.9235 x 0.153 / 2 = 2,119.4325.
+    self_employment_tax_ald_person: 2_119.4325
+    self_employed_pension_contribution_ald_person: 15_000
+    # Schedule C: 20,000 - 2 / 3 x 2,119.4325 - 15,000 = 3,587.045.
+    # Partnership (line 9 is 0): 10,000 - 1 / 3 x 2,119.4325 = 9,293.5225.
+    self_employed_health_insurance_earned_income_limit: 9_293.5225
+
+- name: Case 16, an S corporation shareholder's wages are the earned income.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 50_000
+    s_corp_shareholder_medicare_wages: 50_000
+    self_employment_income: 10_000
+  output:
+    # Line 11: 50,000. The Schedule C business would give
+    # 10,000 - 10,000 x 0.9235 x 0.153 / 2 = 9,293.5225.
+    self_employed_health_insurance_earned_income_limit: 50_000
+
+- name: Case 17, a named Schedule C business ignores the S corporation wages.
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    employment_income: 50_000
+    s_corp_shareholder_medicare_wages: 50_000
+    self_employment_income: 10_000
+    self_employed_health_insurance_plan_business: SCHEDULE_C
+  output:
+    self_employment_tax_ald_person: 706.4775
+    self_employed_health_insurance_earned_income_limit: 9_293.5225