Leave dependents' income out of Wisconsin homestead credit household income

changelog.d/wi-homestead-dependent-income.fixed.md

@@ -0,0 +1 @@
+Leave a tax unit dependent's income, such as a child's Social Security, SSI, unemployment compensation or capital gains, and a dependent's rent and property taxes out of the Wisconsin homestead credit, and test each spouse separately as the claimant for its age and earned income requirements.

policyengine_us/parameters/gov/states/wi/tax/income/credits/homestead/income/sources.yaml

@@ -12,7 +12,9 @@ values:
     - adjusted_gross_income
     # additional homestead income sources:
     - tax_exempt_interest_income
-    - tax_exempt_social_security
+    # The household is the claimant and spouse (Wis. Stat. 71.52(4)), so
+    # this leaves out a dependent's benefits, unlike tax_exempt_social_security.
+    - filer_tax_exempt_social_security
     - tax_exempt_pension_income
     - tax_exempt_unemployment_compensation
     # cash transfer income sources:

policyengine_us/tests/policy/baseline/gov/states/wi/tax/income/wi_homestead_credit.yaml

@@ -41,3 +41,35 @@
     state_code: WI
   output:
     wi_homestead_credit: 0
+
+- name: Case 5, a dependent grandchild's survivor benefits do not reduce the claimant's credit.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 70
+        social_security_retirement: 18_000
+        taxable_pension_income: 6_000
+        rent: 9_000
+      person2:
+        age: 17
+        is_tax_unit_dependent: true
+        social_security_survivors: 12_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    # Household income 23,500 (6,000 + 18,000 - 500), without the
+    # grandchild's 12,000; it is under the 24,680 limit.
+    wi_homestead_income: 23_500
+    wi_homestead_eligible: true
+    # Rent with heat included: 9,000 x 20% = 1,800, capped at 1,460.
+    wi_homestead_property_tax: 1_800
+    # (1,460 - (23,500 - 8,060) x 8.785%) x 80% = (1,460 - 1,356.40) x 80%.
+    # Schedule H's Tables A and B round to bands and give 84.
+    wi_homestead_credit: 82.88

policyengine_us/tests/policy/baseline/gov/states/wi/tax/income/wi_homestead_disqualified_losses.yaml

@@ -12,7 +12,7 @@
     tax_units:
       tax_unit:
         members: [head]
-        loss_limited_net_capital_gains: -3_000 # line 3
+        filer_loss_limited_net_capital_gains: -3_000 # line 3
     households:
       household:
         members: [head]
@@ -156,7 +156,7 @@
     tax_units:
       tax_unit:
         members: [head, child]
-        loss_limited_net_capital_gains: 0
+        filer_loss_limited_net_capital_gains: 0
     households:
       household:
         members: [head, child]

policyengine_us/tests/policy/baseline/gov/states/wi/tax/income/wi_homestead_eligible.yaml

@@ -95,3 +95,93 @@
     state_code: WI
   output:
     wi_homestead_eligible: false
+
+# The claimant or the claimant's spouse must have earned income (2024
+# Schedule H instructions, page 10); unemployment compensation is not earned
+# income (page 7), and a dependent's wages do not qualify the claimant.
+
+- name: Case 8, a dependent's wages do not meet the claimant's earned income test.
+  period: 2024
+  input:
+    people:
+      person1:
+        age: 40
+        unemployment_compensation: 6_000
+      person2:
+        age: 17
+        is_tax_unit_dependent: true
+        employment_income: 4_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    wi_homestead_eligible: false
+
+- name: Case 9, the claimant's own wages meet the earned income test.
+  period: 2024
+  input:
+    people:
+      person1:
+        age: 40
+        employment_income: 4_000
+      person2:
+        age: 17
+        is_tax_unit_dependent: true
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    wi_homestead_eligible: true
+
+# Either spouse can be the claimant, who must be 18 or older and 62 or older,
+# disabled or have their own earned income (2024 Schedule H instructions,
+# pages 4 and 10; Wis. Stat. 71.52(1g)).
+
+- name: Case 10, one spouse's wages qualify even when the other has a larger self-employment loss.
+  period: 2024
+  input:
+    people:
+      person1:
+        age: 40
+        employment_income: 5_000
+      person2:
+        age: 40
+        self_employment_income: -8_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    wi_homestead_eligible: true
+
+- name: Case 11, the earner must also be 18 or older.
+  period: 2024
+  input:
+    people:
+      person1:
+        age: 17
+        employment_income: 6_000
+        is_tax_unit_head: true
+      person2:
+        age: 19
+        is_tax_unit_spouse: true
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    wi_homestead_eligible: false

policyengine_us/tests/policy/baseline/gov/states/wi/tax/income/wi_homestead_income.yaml

@@ -99,3 +99,128 @@
     # loss_ald deducts the loss of total_self_employment_income (0 here), so
     # the add-back follows that total and household income is the same.
     wi_homestead_income: 5_000
+
+# A household is the claimant and the claimant's spouse (Wis. Stat. 71.52(4);
+# 2024 Schedule H instructions, page 8), and the instructions say to leave out
+# children's social security and SSI (page 13), so a dependent's income is not
+# household income. The $500 deduction for each dependent still applies.
+
+- name: Case 6, a dependent grandchild's survivor benefits are not household income.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 70
+        social_security_retirement: 18_000
+        taxable_pension_income: 6_000
+      person2:
+        age: 17
+        is_tax_unit_dependent: true
+        social_security_survivors: 12_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    # No social security is taxable: 6,000 + 9,000 is under the 25,000 base.
+    adjusted_gross_income: 6_000
+    # Schedule H: 6,000 pension + 18,000 social security - 500 for one
+    # dependent = 23,500. The grandchild's 12,000 is left out.
+    wi_homestead_income: 23_500
+
+- name: Case 7, a dependent's SSI and 2020 excluded unemployment compensation are not household income.
+  period: 2020
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 66
+        social_security_retirement: 15_000
+        taxable_pension_income: 5_000
+      person2:
+        age: 17
+        is_tax_unit_dependent: true
+        unemployment_compensation: 8_000
+        ssi: 3_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    # The child's 8,000 is under the 10,200 exclusion on the child's own
+    # federal return.
+    tax_exempt_unemployment_compensation: [0, 8_000]
+    # 5,000 pension + 15,000 social security - 500 = 19,500.
+    wi_homestead_income: 19_500
+
+- name: Case 8, a dependent's capital loss is not added back to household income.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 70
+        social_security_retirement: 12_000
+        taxable_pension_income: 6_000
+      person2:
+        age: 17
+        is_tax_unit_dependent: true
+        long_term_capital_gains: -2_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    spm_units:
+      spm_unit:
+        members: [person1, person2]
+        # No W-2 payments, which would count too (Tax 14.03(4)(b)3.b).
+        tanf: 0
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    # The child's loss is on the child's own return, so AGI stays 6,000 and
+    # Schedule 4 line 3 adds nothing back: 6,000 + 12,000 - 500 = 17,500.
+    adjusted_gross_income: 6_000
+    wi_homestead_disqualified_losses: 0
+    wi_homestead_income: 17_500
+
+- name: Case 9, a dependent's capital gain does not shrink the claimant's loss add-back.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 70
+        social_security_retirement: 12_000
+        taxable_pension_income: 6_000
+        long_term_capital_gains: -3_000
+      person2:
+        age: 17
+        is_tax_unit_dependent: true
+        long_term_capital_gains: 2_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    spm_units:
+      spm_unit:
+        members: [person1, person2]
+        # No W-2 payments, which would count too (Tax 14.03(4)(b)3.b).
+        tanf: 0
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    # AGI = 6,000 - 3,000 claimant's allowed loss = 3,000; the 3,000 loss is
+    # added back: 3,000 + 3,000 + 12,000 - 500 = 17,500.
+    adjusted_gross_income: 3_000
+    wi_homestead_disqualified_losses: 3_000
+    wi_homestead_income: 17_500

policyengine_us/tests/policy/baseline/gov/states/wi/tax/income/wi_homestead_property_tax.yaml

@@ -7,3 +7,57 @@
     state_code: WI
   output:
     wi_homestead_property_tax: 360  # = 200 + 800 * 0.20
+
+# Property taxes count on a homestead the claimant or a household member owns
+# (Wis. Stat. 71.52(7)), and rent the claimant and household pay (71.52(8)).
+# The household is the claimant and spouse (71.52(4)).
+
+- name: Case 2, property taxes a dependent pays do not count.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 30
+        employment_income: 12_000
+      person2:
+        age: 70
+        is_tax_unit_dependent: true
+        social_security_retirement: 26_000
+        real_estate_taxes: 2_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_code: WI
+  output:
+    wi_homestead_property_tax: 0
+    wi_homestead_credit: 0
+
+- name: Case 3, the claimant's rent and the spouse's property taxes count; a dependent's rent does not.
+  period: 2024
+  absolute_error_margin: 0.01
+  input:
+    people:
+      person1:
+        age: 45
+        rent: 6_000
+      person2:
+        age: 44
+        real_estate_taxes: 300
+      person3:
+        age: 17
+        is_tax_unit_dependent: true
+        rent: 1_000
+    tax_units:
+      tax_unit:
+        members: [person1, person2, person3]
+    households:
+      household:
+        members: [person1, person2, person3]
+        state_code: WI
+  output:
+    # 300 + 6,000 x 20% = 1,500.
+    wi_homestead_property_tax: 1_500

policyengine_us/variables/gov/states/wi/tax/income/credits/homestead/wi_homestead_disqualified_losses.py

@@ -39,8 +39,12 @@ def formula(tax_unit, period, parameters):
         # (Form 4797), a tax-unit amount. other_net_gain does not separate
         # the losses from involuntary conversions that line 9 leaves out.
         business_property_loss = max_(0, -tax_unit("other_net_gain", period))
-        # Schedule 4, line 3: net capital loss included in income.
-        capital_loss = max_(0, -tax_unit("loss_limited_net_capital_gains", period))
+        # Schedule 4, line 3: net capital loss included in income. Only the
+        # claimant's and spouse's: a dependent's gains and losses are on the
+        # dependent's own return and outside the household (71.52(4)).
+        capital_loss = max_(
+            0, -tax_unit("filer_loss_limited_net_capital_gains", period)
+        )
         return (
             tax_unit.sum(person_losses * head_or_spouse)
             + business_property_loss