Fix VA spouse tax adjustment using incorrectly prorated VAGI

changelog_entry.yaml

@@ -0,0 +1,4 @@
+- bump: patch
+  changes:
+    fixed:
+    - Fix Virginia spouse tax adjustment to calculate separate VAGI per person instead of prorating combined VAGI.

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

@@ -63,3 +63,25 @@
         va_income_tax_before_non_refundable_credits: 0
   output:
     va_spouse_tax_adjustment: 0
+
+- name: Elderly head with income below age deduction - not eligible for STA (issue 6958)
+  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
+    va_income_tax: 1_402.22

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

@@ -105,7 +105,7 @@
   output:
     va_spouse_tax_adjustment_eligible: true
 
-- name: Spouse and Head with AGI less exemption at 0 
+- name: Spouse and Head with AGI less exemption at 0
   period: 2021
   input:
     people:
@@ -128,3 +128,27 @@
         tax_unit_is_joint: true
   output:
     va_spouse_tax_adjustment_eligible: false
+
+- name: Elderly head with income below age deduction should not be STA eligible
+  period: 2021
+  input:
+    people:
+      person1:
+        adjusted_gross_income_person: 11_753
+        age: 75
+        is_tax_unit_head: true
+      person2:
+        adjusted_gross_income_person: 55_728
+        age: 40
+        is_tax_unit_spouse: true
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        adjusted_gross_income: 67_481
+        filing_status: JOINT
+    households:
+      household:
+        members: [person1, person2]
+        state_code: VA
+  output:
+    va_spouse_tax_adjustment_eligible: false

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

@@ -9,7 +9,7 @@
     tax_units:
       tax_unit:
         members: [person1, person2]
-        va_agi: 30_000
+        va_subtractions: 10_000
     households:
       household:
         members: [person1, person2]
@@ -28,10 +28,34 @@
     tax_units:
       tax_unit:
         members: [person1, person2]
-        va_agi: 8_000
+        va_subtractions: 2_000
     households:
       household:
         members: [person1, person2]
         state_code: VA
   output:
     va_agi_person: [8_000, 0]
+
+- name: Age deduction applied directly to eligible person, not prorated
+  period: 2021
+  input:
+    people:
+      person1:
+        adjusted_gross_income_person: 11_753
+        age: 75
+        is_tax_unit_head_or_spouse: true
+      person2:
+        adjusted_gross_income_person: 55_728
+        age: 40
+        is_tax_unit_head_or_spouse: true
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        va_subtractions: 12_000
+        va_age_deduction: 12_000
+    households:
+      household:
+        members: [person1, person2]
+        state_code: VA
+  output:
+    va_agi_person: [-247, 55_728]

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

@@ -0,0 +1,29 @@
+from policyengine_us.model_api import *
+
+
+class va_age_deduction_person(Variable):
+    value_type = float
+    entity = Person
+    label = "Virginia age deduction allocated to 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
+
+        total_deduction = person.tax_unit("va_age_deduction", period)
+
+        age = person("age", period)
+        is_head_or_spouse = person("is_tax_unit_head_or_spouse", period)
+        eligible = is_head_or_spouse & (age >= p.age_minimum)
+
+        count_eligible = person.tax_unit.sum(eligible)
+        return where(
+            eligible & (count_eligible > 0),
+            total_deduction / count_eligible,
+            0,
+        )

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

@@ -12,11 +12,26 @@ 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)
-
-        prorate = np.zeros_like(total_agi)
-        mask = total_federal_agi > 0
-        prorate[mask] = person_agi[mask] / total_federal_agi[mask]
-        return total_agi * prorate
+        person_fagi = person("adjusted_gross_income_person", period)
+        # Apply person-level age deduction directly
+        age_deduction = person("va_age_deduction_person", period)
+        # Prorate non-age subtractions by federal AGI share
+        total_subtractions = person.tax_unit("va_subtractions", period)
+        total_age_deduction = person.tax_unit("va_age_deduction", period)
+        non_age_subtractions = max_(
+            total_subtractions - total_age_deduction, 0
+        )
+        total_federal_agi = person.tax_unit.sum(person_fagi)
+        prorate = where(
+            total_federal_agi > 0, person_fagi / total_federal_agi, 0
+        )
+        person_non_age_subtractions = non_age_subtractions * prorate
+        # Prorate additions the same way
+        additions = person.tax_unit("va_additions", period)
+        person_additions = additions * prorate
+        return (
+            person_fagi
+            + person_additions
+            - age_deduction
+            - person_non_age_subtractions
+        )