Fix Vermont retirement-income exemption eligibility gate for Social Security filers

changelog.d/fix-vt-retirement-exemption-ss-gate.fixed.md

@@ -0,0 +1 @@
+- Fix the Vermont retirement-income exemption eligibility gate to use the Social Security phase-out threshold for Social Security filers.

policyengine_us/tests/policy/baseline/gov/states/vt/tax/income/agi/subtractions/vt_retirement_income_exemption.yaml

@@ -180,3 +180,54 @@
     state_code: VT
   output:
     vt_retirement_income_exemption: 500  # Partial qualified (halfway between $70k and $80k)
+
+# Integration tests: eligibility gate must use the Social Security phase-out
+# threshold (not the CSRS threshold) for Social Security filers in the 2025
+# partial band. Resolves policyengine-taxsim #999 (single) and #1000 (joint).
+- name: VT single SS filer in 2025 partial band gets partial exemption (taxsim #999)
+  absolute_error_margin: 0.1
+  period: 2025
+  input:
+    people:
+      person1:
+        age: 74
+        employment_income: 29_333.33
+        taxable_interest_income: 3.64
+        social_security_retirement: 25_742.70
+        unemployment_compensation: 10_880
+    tax_units:
+      tax_unit:
+        members: [person1]
+    households:
+      household:
+        members: [person1]
+        state_name: VT
+  output:
+    tax_unit_taxable_social_security: 20_725.08
+    vt_retirement_income_exemption_eligible: true
+    vt_retirement_income_exemption: 8_497.28
+    vt_income_tax: 1_281.20
+
+- name: VT joint SS filers in 2025 partial band get partial exemption (taxsim #1000)
+  period: 2025
+  input:
+    people:
+      person1:
+        age: 77
+        employment_income: 52_380.95
+        taxable_interest_income: 29.15
+        social_security_retirement: 27_581.46
+      person2:
+        age: 77
+    marital_units:
+      marital_unit:
+        members: [person1, person2]
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+    households:
+      household:
+        members: [person1, person2]
+        state_name: VT
+  output:
+    vt_retirement_income_exemption_eligible: true

policyengine_us/variables/gov/states/vt/tax/income/adjusted_gross_income/subtractions/retirement_income_exemption/vt_retirement_income_exemption_eligible.py

@@ -21,9 +21,7 @@ def formula(tax_unit, period, parameters):
         # or other eligible retirement systems to determine eligibility
         filing_status = tax_unit("filing_status", period)
         agi = tax_unit("adjusted_gross_income", period)
-        p = parameters(
-            period
-        ).gov.states.vt.tax.income.agi.retirement_income_exemption.csrs.reduction
+        p = parameters(period).gov.states.vt.tax.income.agi.retirement_income_exemption
         # One of the retirement income should be greater than 0
         retirement_income = add(
             tax_unit,
@@ -35,8 +33,34 @@ def formula(tax_unit, period, parameters):
             ],
         )
         retirement_income_qualified = retirement_income > 0
+        # Determine which retirement system the filer uses, mirroring the
+        # main exemption formula, so the eligibility gate uses the matching
+        # phase-out threshold (Social Security thresholds differ from CSRS
+        # under 2025 law, S.51).
+        tax_unit_taxable_social_security = tax_unit(
+            "tax_unit_taxable_social_security", period
+        )
+        vt_military_retirement_pay_exclusion = tax_unit(
+            "vt_military_retirement_pay_exclusion", period
+        )
+        vt_csrs_retirement_pay_exclusion = tax_unit(
+            "vt_csrs_retirement_pay_exclusion", period
+        )
+        larger_retirement_income = max_(
+            tax_unit_taxable_social_security,
+            vt_military_retirement_pay_exclusion,
+        )
+        chosen_retirement_income = max_(
+            larger_retirement_income, vt_csrs_retirement_pay_exclusion
+        )
+        use_ss = tax_unit_taxable_social_security == chosen_retirement_income
+        reduction_end = where(
+            use_ss,
+            p.social_security.reduction.end[filing_status],
+            p.csrs.reduction.end[filing_status],
+        )
         # The agi should below threshold
-        agi_qualified = agi < p.end[filing_status]
+        agi_qualified = agi < reduction_end
         # Both qualified then the filer is qualified for vermont retirement
         # income exemption
         return retirement_income_qualified & agi_qualified