QBID: add SSTB income variable and per-category computation per IRC §199A

[PavelMakarchuk]

Summary

PE currently computes QBID with a single qualified_business_income per person and a single business_is_sstb boolean flag. IRC §199A and Form 8995-A require per-business QBID computation with separate SSTB classification, W-2 wages, and UBIA for each business.

This causes two problems:

1. pprofinc/sprofinc (SSTB income) can't be mapped from TAXSIM — currently treated as zero
2. Mixed SSTB/non-SSTB filers get wrong QBID — the all-or-nothing business_is_sstb flag forces all QBI into one treatment

Legal Basis

IRC §199A(b)(2): QBID is the lesser of 20% of QBI or the W-2/UBIA cap, computed for each qualified trade or business.

IRC §199A(d)(2)-(3): SSTB income is fully excluded from QBID above the threshold ($197,300 single / $394,600 joint for 2025). In the phaseout range, only an "applicable percentage" of SSTB QBI counts.

Form 8995-A: Columns A, B, C — each business has separate QBI (line 2), W-2 wages (line 4), UBIA (line 7), and SSTB checkbox (line 1b). Per-business caps are computed in Part II, then summed on line 16.

Form 8995 (simplified, below threshold): No SSTB distinction needed — all QBI treated the same. Works fine with current PE model.

The distinction matters above the threshold:

• SSTB business: QBID phases to $0 (QBI itself reduced by applicable percentage)
• Non-SSTB business: QBID = min(20% QBI, W-2/UBIA cap) — can be non-zero with sufficient wages/property

Current PE Implementation

qualified_business_income (person) — single aggregated amount
business_is_sstb (person) — single boolean, all-or-nothing
w2_wages_from_qualified_business (person) — single aggregated amount
qbid_amount (person) — single computation

A doctor (SSTB) who also owns a rental property (non-SSTB) can't be modeled correctly — setting business_is_sstb = True would phase out the rental QBID too.

Proposed Change

Add a second QBI category for SSTB income, keeping the current variable for non-SSTB:

New variables

• sstb_self_employment_income (Person) — self-employment income from specified service trades or businesses. Subject to SECA. Gets SSTB phaseout treatment for QBID.

Modified variables

• qualified_business_income — exclude SSTB self-employment income (only non-SSTB sources)
• qbid_amount — compute two QBID components:
  • Non-SSTB: 20% of non-SSTB QBI, subject to W-2/UBIA cap above threshold
  • SSTB: 20% of SSTB QBI × applicable percentage (phases to $0 above threshold)
  • Return sum of both

TAXSIM alignment

Once implemented, policyengine-taxsim can map:

TAXSIM Input	PE Variable	SECA	QBID Treatment
psemp	self_employment_income	Yes	Non-SSTB
pprofinc	sstb_self_employment_income (new)	Yes	SSTB (phaseout)
pbusinc	partnership_s_corp_income (reroute)	No	Non-SSTB
scorp	partnership_s_corp_income	No	Non-SSTB

Integration Tests

# Below threshold — SSTB distinction doesn't matter
- name: qbid_below_threshold_sstb_gets_full_deduction
  absolute_error_margin: 1
  period: 2025
  input:
    people:
      person1:
        sstb_self_employment_income: 100_000
        is_tax_unit_head: true
    tax_units:
      tax_unit:
        members: [person1]
    families:
      family:
        members: [person1]
    spm_units:
      spm_unit:
        members: [person1]
    households:
      household:
        members: [person1]
        state_fips: 6
  output:
    qualified_business_income_deduction: 20_000

# Above threshold — SSTB gets $0, non-SSTB gets W-2 capped amount
- name: qbid_above_threshold_mixed_sstb_and_non_sstb
  absolute_error_margin: 1
  period: 2025
  input:
    people:
      person1:
        employment_income: 400_000
        self_employment_income: 50_000
        sstb_self_employment_income: 50_000
        w2_wages_from_qualified_business: 100_000
        is_tax_unit_head: true
    tax_units:
      tax_unit:
        members: [person1]
    families:
      family:
        members: [person1]
    spm_units:
      spm_unit:
        members: [person1]
    households:
      household:
        members: [person1]
        state_fips: 6
  output:
    # Non-SSTB: min(20% × $50K, 50% × $100K) = min($10K, $50K) = $10K
    # SSTB: $0 (fully above threshold)
    # Total: $10K (subject to taxable income cap)
    qualified_business_income_deduction: 10_000

References

• IRC §199A: https://www.law.cornell.edu/uscode/text/26/199A
  • §199A(b)(2): per-business W-2/UBIA cap
  • §199A(d)(2): SSTB definition
  • §199A(d)(3): SSTB phaseout mechanism
• Form 8995 (simplified): https://www.irs.gov/pub/irs-pdf/f8995.pdf
• Form 8995-A (detailed, per-business): https://www.irs.gov/pub/irs-pdf/f8995a.pdf
• TAXSIM issues: FICA and QBI income policyengine-taxsim#384, All states single 1000Kpprofinc policyengine-taxsim#399, ND 2025 single 951Kpsemp plus lots more policyengine-taxsim#762
• Existing PE-US issue on SSTB input: Add SSTB business income variable #6316