Fix MA gross income to allow self-employment losses to offset other income#7866
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PavelMakarchuk wants to merge 5 commits intomainfrom
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Fix MA gross income to allow self-employment losses to offset other income#7866PavelMakarchuk wants to merge 5 commits intomainfrom
PavelMakarchuk wants to merge 5 commits intomainfrom
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…ncome irs_gross_income floors each income source at zero, dropping losses. MA Form 1 Line 4 allows business losses to offset other 5% income, so add back self-employment losses that were dropped. Closes #7864 Co-Authored-By: Claude Opus 4.6 (1M context) <noreply@anthropic.com>
Codecov Report✅ All modified and coverable lines are covered by tests. Additional details and impacted files@@ Coverage Diff @@
## main #7866 +/- ##
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+ Coverage 71.81% 100.00% +28.18%
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Files 4084 2 -4082
Lines 58886 32 -58854
Branches 288 0 -288
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- Hits 42288 32 -42256
+ Misses 16583 0 -16583
+ Partials 15 0 -15
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MA Form 1 allows losses on lines 6a/6b/7 to offset other 5% income:
- Line 6a: Business/profession loss (self_employment_income)
- Line 6b: Farm loss (farm_income)
- Line 7: Rental, partnership, S-corp loss (rental_income,
partnership_s_corp_income, farm_rent_income)
irs_gross_income floors each source at zero, dropping these losses.
This fix adds them back per the Form 1 line 10 instruction:
"Be sure to subtract any losses in lines 6 or 7."
Closes #7864
Co-Authored-By: Claude Opus 4.6 (1M context) <noreply@anthropic.com>
Separates the Form 1 lines 6/7 loss adjustment into its own variable for clarity. The loss adjustment captures business, farm, rental, partnership, and S-corp losses that irs_gross_income dropped. Co-Authored-By: Claude Opus 4.6 (1M context) <noreply@anthropic.com>
Co-Authored-By: Claude Opus 4.6 (1M context) <noreply@anthropic.com>
Co-Authored-By: Claude Opus 4.6 (1M context) <noreply@anthropic.com>
hua7450
approved these changes
Mar 25, 2026
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Summary
Fixes MA gross income dropping self-employment losses, which inflated MA tax liability.
Closes #7864
Related: PolicyEngine/policyengine-taxsim#752, PolicyEngine/policyengine-taxsim#743
Root Cause
irs_gross_incomeintentionally floors each income source at zero (max_(0, ...)), routing losses throughabove_the_line_deductions. This produces correct federal AGI butma_gross_incomeinherited the loss-free gross income without adding back the losses.Per MA Form 1 Line 4, business income/loss allows negative values that offset other 5% income on Line 10.
Fix
Add back self-employment losses that
irs_gross_incomedropped:Example
Single filer, 2024: $100K interest + -$100K self-employment
Test plan
policyengine-core test policyengine_us/tests/policy/baseline/gov/states/ma/tax/ -c policyengine_us— all 55 tests pass🤖 Generated with Claude Code