Use the filers' Schedule D for the tax on net capital gain

changelog.d/ncg-filer-gains-floor-distributions.fixed.md

@@ -0,0 +1 @@
+Figure net capital gain and the Schedule D Tax Worksheet from the head and spouse's Schedule D, qualified dividends and Form 4952 election only, leaving out tax unit dependents' amounts as adjusted gross income does, and treat each filer's negative capital gain distributions input as zero. Apply the same filer-only scope in Hawaii's alternative capital gains tax worksheet and in the qualified dividends Vermont's flat capital gains exclusion subtracts.

policyengine_us/tests/policy/baseline/gov/irs/tax/federal_income/capital_gains/capital_gains_28_percent_rate_gain.yaml

@@ -180,6 +180,65 @@
     schedule_d_unrecaptured_section_1250_gain: 208_514.11
     adjusted_net_capital_gain: 290_510.39
 
+- name: A dependent's collectibles gain is on the dependent's own return
+  period: 2025
+  input:
+    people:
+      head:
+        age: 45
+        long_term_capital_gains: 10_000
+      child:
+        age: 12
+        is_tax_unit_dependent: true
+        long_term_capital_gains: 5_000
+        collectibles_gain_or_loss: 5_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+  output:
+    # The head's worksheet has no collectibles gain.
+    capital_gains_28_percent_rate_gain: 0
+    net_capital_gain: 10_000
+    adjusted_net_capital_gain: 10_000
+
+- name: A dependent's Schedule D line 18 amounts are on the dependent's own return
+  period: 2025
+  input:
+    people:
+      head:
+        age: 45
+        long_term_capital_gains: 10_000
+      child:
+        age: 12
+        is_tax_unit_dependent: true
+        long_term_capital_gains: 5_000
+        long_term_capital_gains_on_collectibles: 2_000
+        long_term_capital_gains_on_small_business_stock: 1_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+  output:
+    capital_gains_28_percent_rate_gain: 0
+
+- name: A dependent's short-term loss does not reduce the head's 28 percent rate gain
+  period: 2025
+  input:
+    people:
+      head:
+        age: 45
+        long_term_capital_gains: 50_000
+        collectibles_gain_or_loss: 10_000
+      child:
+        age: 12
+        is_tax_unit_dependent: true
+        short_term_capital_gains: -8_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+  output:
+    # Line 6 is the head's Schedule D line 7 loss: none.
+    capital_gains_28_percent_rate_gain: 10_000
+
 # The 2025 Schedule D instructions' 28% Rate Gain Worksheet (page 11) and
 # Unrecaptured Section 1250 Gain Worksheet (page 13) apply to the filer's
 # return. Include a joint filer's spouse, but exclude dependent amounts.

policyengine_us/tests/policy/baseline/gov/irs/tax/federal_income/capital_gains/net_capital_gain.yaml

@@ -12,3 +12,278 @@
         members: [person1]
   output:
     net_capital_gain: 10_500
+
+# 26 U.S.C. 1222(11): net capital gain is the net long-term capital gain over
+# the net short-term capital loss, Schedule D lines 15 and 7 of the 2025
+# Schedule D. Section 1(h)(11)(A) adds qualified dividend income. These are
+# amounts on the head and spouse's return. A tax unit dependent's gains,
+# losses and dividends are on the dependent's own return (2025 Form 8814, line
+# 4), as in adjusted gross income.
+
+- name: A dependent's long-term gain is not on the head's Schedule D
+  period: 2025
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 60_000
+        long_term_capital_gains: 10_000
+      child:
+        age: 10
+        is_tax_unit_dependent: true
+        long_term_capital_gains: 20_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+    households:
+      household:
+        members: [head, child]
+        state_code: TX
+  output:
+    # Schedule D line 15 = 10,000 (the head's), line 16 = 10,000.
+    net_capital_gain: 10_000
+    adjusted_net_capital_gain: 10_000
+    dwks09: 10_000
+    dwks10: 10_000
+    has_qdiv_or_ltcg: true
+    # The child's gain is not in gross income either: 60,000 + 10,000.
+    adjusted_gross_income: 70_000
+    # Head of household: 70,000 - 23,625 standard deduction.
+    taxable_income: 46_375
+    # Ordinary income 36,375: 10% x 17,000 + 12% x 19,375 = 1,700 + 2,325.
+    # The 10,000 gain is below the 64,750 zero-rate maximum, so 0% on it.
+    # Counting the child's gain too (30,000) gave 1,637.50.
+    income_tax_before_credits: 4_025
+
+- name: A dependent's long-term gain, filing single
+  period: 2025
+  input:
+    people:
+      head:
+        age: 40
+        employment_income: 60_000
+        long_term_capital_gains: 10_000
+      child:
+        age: 10
+        is_tax_unit_dependent: true
+        long_term_capital_gains: 20_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+        filing_status: SINGLE
+    households:
+      household:
+        members: [head, child]
+        state_code: TX
+  output:
+    net_capital_gain: 10_000
+    # 70,000 - 15,750 standard deduction.
+    taxable_income: 54_250
+    # Ordinary income 44,250: 10% x 11,925 + 12% x 32,325 = 1,192.50 +
+    # 3,879. Of the 10,000 gain, 48,350 - 44,250 = 4,100 is at 0% and 5,900
+    # at 15% (885). Counting the child's gain too (30,000) gave 3,556.50.
+    income_tax_before_credits: 5_956.5
+
+- name: A dependent's short-term loss does not reduce the head's net capital gain
+  period: 2025
+  input:
+    people:
+      head:
+        age: 40
+        long_term_capital_gains: 10_000
+      child:
+        age: 10
+        is_tax_unit_dependent: true
+        short_term_capital_gains: -8_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+    households:
+      household:
+        members: [head, child]
+        state_code: TX
+  output:
+    # The head's Schedule D line 7 is 0 and line 15 is 10,000.
+    net_capital_gain: 10_000
+    dwks09: 10_000
+    adjusted_gross_income: 10_000
+
+- name: Spouses' gains and losses net, and a dependent's stay off the return
+  period: 2025
+  input:
+    people:
+      head:
+        age: 40
+        long_term_capital_gains: 10_000
+      spouse:
+        age: 40
+        short_term_capital_gains: -4_000
+      child:
+        age: 10
+        is_tax_unit_dependent: true
+        long_term_capital_gains: 20_000
+        short_term_capital_gains: -1_000
+        non_sch_d_capital_gains: 1_000
+    tax_units:
+      tax_unit:
+        members: [head, spouse, child]
+    households:
+      household:
+        members: [head, spouse, child]
+        state_code: TX
+  output:
+    # Joint Schedule D: line 7 = (4,000), line 15 = 10,000, line 16 = 6,000.
+    # 1222(11): 10,000 - 4,000.
+    net_capital_gain: 6_000
+    dwks09: 6_000
+    adjusted_gross_income: 6_000
+
+- name: A dependent's qualified dividends are not on the head's return
+  period: 2025
+  input:
+    people:
+      head:
+        age: 45
+        employment_income: 150_000
+        long_term_capital_gains: 10_000
+      child:
+        age: 12
+        is_tax_unit_dependent: true
+        qualified_dividend_income: 20_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+    households:
+      household:
+        members: [head, child]
+        state_code: TX
+  output:
+    # Form 1040 line 3a is the head's: 0.
+    dividend_income_reduced_by_investment_income: 0
+    net_capital_gain: 10_000
+    adjusted_net_capital_gain: 10_000
+    adjusted_gross_income: 160_000
+    # Head of household: 160,000 - 23,625 = 136,375; ordinary income 126,375:
+    # 1,700 + 12% x 47,850 + 22% x 38,500 + 24% x 23,025 = 1,700 + 5,742 +
+    # 8,470 + 5,526; the 10,000 gain at 15% (1,500). Counting the child's
+    # dividends too taxed 20,000 of the head's income at 15% rather than 24%
+    # (21,138).
+    income_tax_before_credits: 22_938
+
+- name: A dependent's qualified dividends alone do not call for the worksheet
+  period: 2025
+  input:
+    people:
+      head:
+        age: 45
+        employment_income: 60_000
+      child:
+        age: 12
+        is_tax_unit_dependent: true
+        qualified_dividend_income: 5_000
+    tax_units:
+      tax_unit:
+        members: [head, child]
+    households:
+      household:
+        members: [head, child]
+        state_code: TX
+  output:
+    # No qualified dividends on Form 1040 line 3a and no Schedule D.
+    has_qdiv_or_ltcg: false
+    net_capital_gain: 0
+
+- name: A dependent's investment income election is on the dependent's own Form 4952
+  period: 2025
+  input:
+    people:
+      head:
+        age: 45
+        long_term_capital_gains: 10_000
+        qualified_dividend_income: 2_000
+      child:
+        age: 12
+        is_tax_unit_dependent: true
+        investment_income_elected_form_4952: 500
+    tax_units:
+      tax_unit:
+        members: [head, child]
+    households:
+      household:
+        members: [head, child]
+        state_code: TX
+  output:
+    # The head elects nothing: 10,000 + 2,000.
+    net_capital_gain: 12_000
+
+- name: A negative distributions input counts as zero in net capital gain
+  period: 2025
+  input:
+    people:
+      head:
+        age: 45
+        employment_income: 100_000
+        long_term_capital_gains: 10_000
+        non_sch_d_capital_gains: -2_000
+    tax_units:
+      tax_unit:
+        members: [head]
+    households:
+      household:
+        members: [head]
+        state_code: TX
+  output:
+    # Form 1099-DIV box 2a, total capital gain distributions, is not
+    # negative. Schedule D line 13 = 0, line 15 = 10,000, as in AGI.
+    adjusted_gross_income: 110_000
+    net_capital_gain: 10_000
+    dwks09: 10_000
+    # Taxable income 110,000 - 15,750 = 94,250; ordinary income 84,250:
+    # 1,192.50 + 12% x 36,550 + 22% x 35,775 = 1,192.50 + 4,386 + 7,870.50;
+    # the 10,000 gain at 15% (1,500). With the input subtracted (8,000) it
+    # was 15,089.
+    income_tax_before_credits: 14_949
+
+- name: Supplied adult dependent roles keep capital income off the parent's return
+  period: 2025
+  input:
+    people:
+      parent:
+        age: 50
+        tax_unit_role_input: HEAD
+        employment_income: 150_000
+        long_term_capital_gains: 10_000
+      student:
+        age: 20
+        is_full_time_student: true
+        tax_unit_role_input: DEPENDENT
+        long_term_capital_gains: 20_000
+        short_term_capital_gains: -5_000
+        non_sch_d_capital_gains: 9_000
+        qualified_dividend_income: 5_000
+        collectibles_gain_or_loss: 5_000
+        investment_income_elected_form_4952: 3_000
+    tax_units:
+      tax_unit:
+        members: [parent, student]
+    marital_units:
+      parent_unit:
+        members: [parent]
+      student_unit:
+        members: [student]
+    households:
+      household:
+        members: [parent, student]
+        state_code: TX
+  output:
+    is_tax_unit_dependent: [false, true]
+    filing_status: HEAD_OF_HOUSEHOLD
+    adjusted_gross_income: 160_000
+    net_capital_gain: 10_000
+    dwks09: 10_000
+    dwks10: 10_000
+    dividend_income_reduced_by_investment_income: 0
+    capital_gains_28_percent_rate_gain: 0
+    capital_gains_tax: 1_500
+    # The same filer income and HOH tax calculation as the child-dividends case.
+    regular_tax_before_credits: 22_938