Use the married-filing-separately breakpoint on Form 6251 Part III line 18

.gitignore

@@ -70,3 +70,6 @@ tmpclaude-*-cwd
 # Claude Code worktrees
 .claude/worktrees/
 .gitnexus/
+
+# Hypothesis example database
+.hypothesis/

changelog.d/amt-part-iii-line-18-separate.fixed.md

@@ -0,0 +1 @@
+Apply the married-filing-separately 28% breakpoint (26 U.S.C. 55(b)(1)(C)) on Form 6251 Part III line 18, so separate filers with qualified dividends or capital gains no longer get the full breakpoint in the capital gains computation of the alternative minimum tax.

policyengine_us/tests/policy/baseline/gov/irs/tax/federal_income/alternative_minimum_tax/amt_tax_including_cg.yaml

@@ -157,6 +157,159 @@
     # 20%: $0.
     amt_tax_including_cg: 46_612.50
 
+# Form 6251 (2025), line 18: "If line 17 is $239,100 or less ($119,550 or
+# less if married filing separately), multiply line 17 by 26% (0.26).
+# Otherwise, multiply line 17 by 28% (0.28) and subtract $4,782 ($2,391 if
+# married filing separately) from the result." 26 U.S.C. 55(b)(1)(C) halves
+# the breakpoint for a married individual filing a separate return, and
+# 55(b)(3)(A) figures line 18 "at the rates and in the same manner" as
+# 55(b)(1)(A). Lines 19 and 25 for married filing separately are $48,350
+# and $300,000.
+- name: Married filing separately, line 17 above the separate 28% breakpoint
+  period: 2025
+  input:
+    filing_status: SEPARATE
+    amt_income_less_exemptions: 1_061_000
+    dwks10: 925_000
+    dwks13: 925_000
+    dwks14: 136_000
+    unrecaptured_section_1250_gain: 0
+  output:
+    # Line 12: $1,061,000. Line 13: $925,000 ($25,000 of qualified
+    # dividends and $900,000 of long-term gain). Line 14: $0.
+    # Lines 15 and 16: $925,000. Line 17: $1,061,000 - $925,000 = $136,000.
+    # Line 18: $136,000 > $119,550, so 28% * $136,000 - $2,391 = $35,689.
+    # (The full $239,100 breakpoint would give 26% * $136,000 = $35,360.)
+    # Line 19: $48,350. Line 20: $136,000. Line 21: $0.
+    # Line 22: $925,000. Line 23: $0. Line 24: $925,000.
+    # Line 25: $300,000. Lines 26 to 28: $0 + $136,000 = $136,000.
+    # Line 29: $164,000. Line 30: $164,000. Line 31: 15% = $24,600.
+    # Line 32: $164,000. Line 33: $761,000. Line 34: 20% = $152,200.
+    # Line 14 is zero, so lines 35 to 37 are skipped.
+    # Line 38: $35,689 + $24,600 + $152,200 = $212,489.
+    amt_tax_including_cg: 212_489
+
+- name: Married filing separately, line 17 between the separate and full breakpoints
+  period: 2025
+  input:
+    filing_status: SEPARATE
+    amt_income_less_exemptions: 250_000
+    dwks10: 50_000
+    dwks13: 50_000
+    dwks14: 200_000
+    unrecaptured_section_1250_gain: 0
+  output:
+    # Line 12: $250,000. Lines 13, 15 and 16: $50,000. Line 17: $200,000.
+    # Line 18: 28% * $200,000 - $2,391 = $53,609 (not 26% * $200,000 =
+    # $52,000). Line 21: max(0, $48,350 - $200,000) = $0. Line 22:
+    # $50,000. Line 23: $0. Line 24: $50,000. Line 29: $300,000 - $200,000
+    # = $100,000. Line 30: $50,000. Line 31: $7,500. Line 33: $0.
+    # Line 38: $53,609 + $7,500 = $61,109.
+    amt_tax_including_cg: 61_109
+
+- name: Married filing separately, line 17 exactly at the separate breakpoint
+  period: 2025
+  input:
+    filing_status: SEPARATE
+    amt_income_less_exemptions: 169_550
+    dwks10: 50_000
+    dwks13: 50_000
+    dwks14: 119_550
+    unrecaptured_section_1250_gain: 0
+  output:
+    # Line 17: $119,550, which is "$119,550 or less", so line 18 is 26% *
+    # $119,550 = $31,083. Line 29: $300,000 - $119,550 = $180,450. Line 30:
+    # $50,000. Line 31: $7,500. Line 38: $31,083 + $7,500 = $38,583.
+    amt_tax_including_cg: 38_583
+
+- name: Married filing separately, line 17 one dollar above the separate breakpoint
+  period: 2025
+  absolute_error_margin: 0.01
+  input:
+    filing_status: SEPARATE
+    amt_income_less_exemptions: 169_551
+    dwks10: 50_000
+    dwks13: 50_000
+    dwks14: 119_551
+    unrecaptured_section_1250_gain: 0
+  output:
+    # Line 17: $119,551. Line 18: 28% * $119,551 - $2,391 = $31,083.28
+    # (26% would give $31,083.26). Line 31: $7,500.
+    # Line 38: $31,083.28 + $7,500 = $38,583.28.
+    amt_tax_including_cg: 38_583.28
+
+- name: Married filing separately, line 17 above the full breakpoint
+  period: 2025
+  input:
+    filing_status: SEPARATE
+    amt_income_less_exemptions: 400_000
+    dwks10: 100_000
+    dwks13: 100_000
+    dwks14: 300_000
+    unrecaptured_section_1250_gain: 0
+  output:
+    # Line 17: $300,000. Line 18: 28% * $300,000 - $2,391 = $81,609 (the
+    # full breakpoint would subtract $4,782, giving $79,218).
+    # Line 22: $100,000. Line 29: $300,000 - $300,000 = $0. Line 30: $0.
+    # Line 32: $0. Line 33: $100,000. Line 34: 20% = $20,000.
+    # Line 38: $81,609 + $20,000 = $101,609.
+    amt_tax_including_cg: 101_609
+
+- name: Married filing separately, unrecaptured section 1250 gain
+  period: 2025
+  input:
+    filing_status: SEPARATE
+    amt_income_less_exemptions: 500_000
+    dwks10: 300_000
+    dwks13: 200_000
+    dwks14: 200_000
+    unrecaptured_section_1250_gain: 100_000
+  output:
+    # Line 12: $500,000. Line 13: $200,000. Line 14: $100,000.
+    # Line 15: min($200,000 + $100,000, $300,000) = $300,000. Line 16:
+    # $300,000. Line 17: $200,000. Line 18: 28% * $200,000 - $2,391 =
+    # $53,609. Line 21: $0. Line 22: $200,000. Line 23: $0. Line 24:
+    # $200,000. Line 29: $300,000 - $200,000 = $100,000. Line 30: $100,000.
+    # Line 31: $15,000. Line 32: $100,000. Line 33: $100,000. Line 34:
+    # $20,000. Line 35: $200,000 + $100,000 + $100,000 = $400,000.
+    # Line 36: $100,000. Line 37: 25% = $25,000.
+    # Line 38: $53,609 + $15,000 + $20,000 + $25,000 = $113,609.
+    amt_tax_including_cg: 113_609
+
+- name: Single filer with the amounts of the first separate case keeps the full breakpoint
+  period: 2025
+  input:
+    filing_status: SINGLE
+    amt_income_less_exemptions: 1_061_000
+    dwks10: 925_000
+    dwks13: 925_000
+    dwks14: 136_000
+    unrecaptured_section_1250_gain: 0
+  output:
+    # Line 17: $136,000 <= $239,100, so line 18 is 26% * $136,000 =
+    # $35,360. Line 19: $48,350; line 21: $0. Line 22: $925,000.
+    # Line 25: $533,400. Line 28: $136,000. Line 29: $397,400. Line 30:
+    # $397,400. Line 31: $59,610. Line 32: $397,400. Line 33: $527,600.
+    # Line 34: $105,520. Line 38: $35,360 + $59,610 + $105,520 = $200,490.
+    amt_tax_including_cg: 200_490
+
+- name: Married filing separately, no preferential income, 2026
+  period: 2026
+  input:
+    filing_status: SEPARATE
+    amt_income_less_exemptions: 136_000
+    dwks10: 0
+    dwks13: 0
+    dwks14: 136_000
+    unrecaptured_section_1250_gain: 0
+  output:
+    # Rev. Proc. 2025-32, section 3.10: for 2026 the 28 percent rate applies
+    # above $122,250 for married individuals filing separate returns
+    # ($244,500 for all other taxpayers). Line 17 is all of line 12,
+    # $136,000, so line 18 is 28% * $136,000 - 2% * $122,250 = $38,080 -
+    # $2,445 = $35,635, the same as line 39. Lines 22 to 37 are zero.
+    amt_tax_including_cg: 35_635
+
 # 26 U.S.C. 911(f)(2)(B) and the 2025 Form 6251 instructions, Part III,
 # "Form 2555": lines 13 to 15 are figured after reducing the gains by the AMT
 # capital gain excess (the gains less Form 6251 line 6), while lines 20 and 27

policyengine_us/tests/policy/baseline/gov/irs/tax/federal_income/alternative_minimum_tax/base_tax/amt_base_tax.yaml

@@ -22,6 +22,16 @@
   output:
     amt_base_tax: 52_000
 
+- name: Married filing separately above the separate breakpoint
+  period: 2025
+  input:
+    filing_status: SEPARATE
+    amt_income_less_exemptions: 136_000
+  output:
+    # Form 6251 (2025) line 7 "All others" (and line 39): $136,000 is more
+    # than $119,550, so 28% * $136,000 - $2,391 = $35,689.
+    amt_base_tax: 35_689
+
 - name: A Form 2555 filer's tax on line 3 of the Form 6251 Foreign Earned Income Tax Worksheet
   period: 2025
   input:

policyengine_us/tests/policy/baseline/gov/irs/tax/federal_income/alternative_minimum_tax/integration.yaml

@@ -24,3 +24,52 @@
     alternative_minimum_tax: 0
     # Expected income tax from TAXSIM35
     income_tax: 85_538
+
+# Married filing separately with qualified dividends and long-term gain, so
+# Form 6251 Part III applies and line 18 uses the separate breakpoint
+# ($119,550 for 2025; 26 U.S.C. 55(b)(1)(C)). Worked by hand from the 2025
+# Form 1040 instructions (Qualified Dividends and Capital Gain Tax Worksheet,
+# Tax Computation Worksheet) and the 2025 Form 6251.
+- name: Married filing separately with dividends and long-term gain, 2025
+  period: 2025
+  input:
+    people:
+      person:
+        age: 45
+        employment_income: 150_000
+        qualified_dividend_income: 25_000
+        long_term_capital_gains: 900_000
+    tax_units:
+      tax_unit:
+        members: [person]
+        filing_status: SEPARATE
+    households:
+      household:
+        members: [person]
+        state_code: TX
+  output:
+    # Taxable income: $1,075,000 - $15,750 standard deduction = $1,059,250.
+    # Qualified Dividends and Capital Gain Tax Worksheet: line 4 $925,000;
+    # line 5 $134,250; line 18 15% * $165,750 = $24,862.50; line 21 20% *
+    # $759,250 = $151,850; line 22 tax on $134,250 = $25,067; line 25
+    # $201,779.50.
+    taxable_income: 1_059_250
+    regular_tax_before_credits: 25_067
+    capital_gains_tax: 176_712.5
+    # Form 6251: line 1 $1,059,250; line 2a $15,750; line 4 $1,075,000 plus
+    # 25% * ($1,075,000 - $900,350) = $43,662.50 for married filing
+    # separately (line 4 instructions) = $1,118,662.50. Line 5: $68,500 -
+    # 25% * ($1,118,662.50 - $626,350) < 0, so $0. Line 6: $1,118,662.50.
+    amt_income_less_exemptions: 1_118_662.5
+    # Part III: line 12 $1,118,662.50; lines 13, 15, 16 $925,000; line 17
+    # $193,662.50; line 18 28% * $193,662.50 - $2,391 = $51,834.50; line 20
+    # $134,250; line 21 $0; line 22 $925,000; line 29 $300,000 - $134,250 =
+    # $165,750; line 31 $24,862.50; line 33 $759,250; line 34 $151,850;
+    # line 38 $228,547. Line 39: 28% * $1,118,662.50 - $2,391 =
+    # $310,834.50. Line 40 and line 7: $228,547.
+    amt_tax_including_cg: 228_547
+    amt_base_tax: 310_834.5
+    # Line 9 $228,547 less line 10 $201,779.50 = $26,767.50 (26% on line 18
+    # would give $25,285.25).
+    alternative_minimum_tax: 26_767.5
+    income_tax_before_credits: 228_547