diff --git a/changelog.d/fix-watca-alternative-max-tax.changed.md b/changelog.d/fix-watca-alternative-max-tax.changed.md
new file mode 100644
index 00000000000..08f47ddcdf1
--- /dev/null
+++ b/changelog.d/fix-watca-alternative-max-tax.changed.md
@@ -0,0 +1 @@
+Fix WATCA alternative maximum tax implementation to match bill text: use 25.5% tax cap on MAGI above exemption instead of deduction, implement binary eligibility at 175% threshold, switch cost-of-living exemption to CPI-U indexing, and add proper MAGI definitions for both the alternative tax and surtax.
diff --git a/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/alternative_tax_rate.yaml b/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/alternative_tax_rate.yaml
new file mode 100644
index 00000000000..6d0705fb3ae
--- /dev/null
+++ b/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/alternative_tax_rate.yaml
@@ -0,0 +1,11 @@
+description: The Working Americans' Tax Cut Act alternative maximum tax rate applied to MAGI above the cost of living exemption.
+metadata:
+  label: WATCA alternative maximum tax rate
+  period: year
+  unit: /1
+  reference:
+    - title: Working Americans' Tax Cut Act Section 1A(a)
+      href: https://www.vanhollen.senate.gov/imo/media/doc/working_americans_tax_cut_act_bill_text.pdf#page=2
+
+values:
+  2026-01-01: 0.255
diff --git a/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/amount.yaml b/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/amount.yaml
index 830c4f49ab9..8679263cf22 100644
--- a/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/amount.yaml
+++ b/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/amount.yaml
@@ -1,4 +1,4 @@
-description: The Working Americans' Tax Cut Act provides a cost of living exemption amount by filing status, indexed for inflation using the chained CPI.
+description: The Working Americans' Tax Cut Act provides a cost of living exemption amount by filing status, indexed for inflation using CPI-U.
 metadata:
   label: WATCA cost of living exemption amount
   period: year
@@ -7,15 +7,10 @@ metadata:
     - filing_status
   propagate_metadata_to_children: true
   uprating:
-    parameter: gov.irs.uprating
-    rounding:
-      type: downwards
-      interval: 50
+    parameter: gov.bls.cpi.cpi_u
   reference:
-    - title: Working Americans' Tax Cut Act bill summary (via Jeff Stein, WaPo)
-      href: https://x.com/JStein_WaPo/status/2029621495295619363
-    - title: "Democrat's plan would eliminate federal income taxes for half of U.S. workers"
-      href: https://www.washingtonpost.com/business/2026/03/05/middle-class-tax-relief-senate-bill/
+    - title: Working Americans' Tax Cut Act Section 1A(c)
+      href: https://www.vanhollen.senate.gov/imo/media/doc/working_americans_tax_cut_act_bill_text.pdf#page=3
 
 SINGLE:
   2026-01-01: 46_000
@@ -26,8 +21,11 @@ HEAD_OF_HOUSEHOLD:
 JOINT:
   2026-01-01: 92_000
 
+# Surviving spouse treated as joint (sec 1(a)(2)). Not explicitly in bill.
 SURVIVING_SPOUSE:
   2026-01-01: 92_000
 
+# Married filing separately falls under "not described in (B) or (C)",
+# i.e., the 100% default category. Not explicitly in bill.
 SEPARATE:
   2026-01-01: 46_000
diff --git a/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/income_limit_multiple.yaml b/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/income_limit_multiple.yaml
new file mode 100644
index 00000000000..1be23b36abd
--- /dev/null
+++ b/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/income_limit_multiple.yaml
@@ -0,0 +1,11 @@
+description: The Working Americans' Tax Cut Act limits eligibility for the alternative maximum tax to filers with MAGI below this multiple of the cost of living exemption amount.
+metadata:
+  label: WATCA cost of living exemption income limit multiple
+  period: year
+  unit: /1
+  reference:
+    - title: Working Americans' Tax Cut Act Section 1A(b)(1)
+      href: https://www.vanhollen.senate.gov/imo/media/doc/working_americans_tax_cut_act_bill_text.pdf#page=2
+
+values:
+  2026-01-01: 1.75
diff --git a/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/phase_out_multiple.yaml b/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/phase_out_multiple.yaml
deleted file mode 100644
index 82b2fa4f935..00000000000
--- a/policyengine_us/parameters/gov/contrib/congress/watca/cost_of_living_exemption/phase_out_multiple.yaml
+++ /dev/null
@@ -1,10 +0,0 @@
-description: The Working Americans' Tax Cut Act phases out the cost of living exemption between the exemption amount and this multiple of the exemption amount.
-metadata:
-  label: WATCA cost of living exemption phase-out multiple
-  period: year
-  unit: /1
-  reference:
-    - title: Working Americans' Tax Cut Act bill summary (via Jeff Stein, WaPo)
-      href: https://x.com/JStein_WaPo/status/2029621495295619363
-values:
-  0000-01-01: 1.75
diff --git a/policyengine_us/parameters/gov/contrib/congress/watca/in_effect.yaml b/policyengine_us/parameters/gov/contrib/congress/watca/in_effect.yaml
index e900158e677..aadcec866e0 100644
--- a/policyengine_us/parameters/gov/contrib/congress/watca/in_effect.yaml
+++ b/policyengine_us/parameters/gov/contrib/congress/watca/in_effect.yaml
@@ -3,5 +3,8 @@ metadata:
   unit: bool
   label: Working Americans' Tax Cut Act in effect
   period: year
+  reference:
+    - title: Working Americans' Tax Cut Act Section 2(c), 3(d)
+      href: https://www.vanhollen.senate.gov/imo/media/doc/working_americans_tax_cut_act_bill_text.pdf#page=4
 values:
   0000-01-01: false
diff --git a/policyengine_us/parameters/gov/contrib/congress/watca/surtax/in_effect.yaml b/policyengine_us/parameters/gov/contrib/congress/watca/surtax/in_effect.yaml
index 426086f7da9..70d03a86b84 100644
--- a/policyengine_us/parameters/gov/contrib/congress/watca/surtax/in_effect.yaml
+++ b/policyengine_us/parameters/gov/contrib/congress/watca/surtax/in_effect.yaml
@@ -3,5 +3,8 @@ metadata:
   unit: bool
   label: WATCA millionaire surtax in effect
   period: year
+  reference:
+    - title: Working Americans' Tax Cut Act Section 3(d)
+      href: https://www.vanhollen.senate.gov/imo/media/doc/working_americans_tax_cut_act_bill_text.pdf#page=8
 values:
   0000-01-01: true
diff --git a/policyengine_us/parameters/gov/contrib/congress/watca/surtax/rate/joint.yaml b/policyengine_us/parameters/gov/contrib/congress/watca/surtax/rate/joint.yaml
index acb01027215..1a558f083e5 100644
--- a/policyengine_us/parameters/gov/contrib/congress/watca/surtax/rate/joint.yaml
+++ b/policyengine_us/parameters/gov/contrib/congress/watca/surtax/rate/joint.yaml
@@ -1,4 +1,4 @@
-description: The Working Americans' Tax Cut Act millionaire surtax rate for joint filers, based on adjusted gross income.
+description: The Working Americans' Tax Cut Act millionaire surtax rate for joint filers, based on modified AGI.
 metadata:
   type: marginal_rate
   threshold_unit: currency-USD
@@ -6,23 +6,32 @@ metadata:
   period: year
   label: WATCA millionaire surtax joint rate
   reference:
-    - title: Working Americans' Tax Cut Act bill summary (via Jeff Stein, WaPo)
-      href: https://x.com/JStein_WaPo/status/2029621495295619363
+    - title: Working Americans' Tax Cut Act Section 59B(a), (c)
+      href: https://www.vanhollen.senate.gov/imo/media/doc/working_americans_tax_cut_act_bill_text.pdf#page=5
 
 brackets:
   - threshold:
-      0000-01-01: 0
+      2026-01-01: 0
     rate:
-      0000-01-01: 0
+      2026-01-01: 0
   - threshold:
-      0000-01-01: 1_500_000
+      values:
+        2026-01-01: 1_500_000
+      metadata:
+        uprating: gov.bls.cpi.cpi_u
     rate:
-      0000-01-01: 0.05
+      2026-01-01: 0.05
   - threshold:
-      0000-01-01: 3_000_000
+      values:
+        2026-01-01: 3_000_000
+      metadata:
+        uprating: gov.bls.cpi.cpi_u
     rate:
-      0000-01-01: 0.10
+      2026-01-01: 0.10
   - threshold:
-      0000-01-01: 7_500_000
+      values:
+        2026-01-01: 7_500_000
+      metadata:
+        uprating: gov.bls.cpi.cpi_u
     rate:
-      0000-01-01: 0.12
+      2026-01-01: 0.12
diff --git a/policyengine_us/parameters/gov/contrib/congress/watca/surtax/rate/single.yaml b/policyengine_us/parameters/gov/contrib/congress/watca/surtax/rate/single.yaml
index 342299f501d..ef00c0448c8 100644
--- a/policyengine_us/parameters/gov/contrib/congress/watca/surtax/rate/single.yaml
+++ b/policyengine_us/parameters/gov/contrib/congress/watca/surtax/rate/single.yaml
@@ -1,4 +1,4 @@
-description: The Working Americans' Tax Cut Act millionaire surtax rate for single filers, based on adjusted gross income.
+description: The Working Americans' Tax Cut Act millionaire surtax rate for single filers, based on modified AGI.
 metadata:
   type: marginal_rate
   threshold_unit: currency-USD
@@ -6,23 +6,32 @@ metadata:
   period: year
   label: WATCA millionaire surtax single rate
   reference:
-    - title: Working Americans' Tax Cut Act bill summary (via Jeff Stein, WaPo)
-      href: https://x.com/JStein_WaPo/status/2029621495295619363
+    - title: Working Americans' Tax Cut Act Section 59B(a)
+      href: https://www.vanhollen.senate.gov/imo/media/doc/working_americans_tax_cut_act_bill_text.pdf#page=5
 
 brackets:
   - threshold:
-      0000-01-01: 0
+      2026-01-01: 0
     rate:
-      0000-01-01: 0
+      2026-01-01: 0
   - threshold:
-      0000-01-01: 1_000_000
+      values:
+        2026-01-01: 1_000_000
+      metadata:
+        uprating: gov.bls.cpi.cpi_u
     rate:
-      0000-01-01: 0.05
+      2026-01-01: 0.05
   - threshold:
-      0000-01-01: 2_000_000
+      values:
+        2026-01-01: 2_000_000
+      metadata:
+        uprating: gov.bls.cpi.cpi_u
     rate:
-      0000-01-01: 0.10
+      2026-01-01: 0.10
   - threshold:
-      0000-01-01: 5_000_000
+      values:
+        2026-01-01: 5_000_000
+      metadata:
+        uprating: gov.bls.cpi.cpi_u
     rate:
-      0000-01-01: 0.12
+      2026-01-01: 0.12
diff --git a/policyengine_us/reforms/congress/watca/working_americans_tax_cut_act.py b/policyengine_us/reforms/congress/watca/working_americans_tax_cut_act.py
index 9653962ad84..860462a6ed5 100644
--- a/policyengine_us/reforms/congress/watca/working_americans_tax_cut_act.py
+++ b/policyengine_us/reforms/congress/watca/working_americans_tax_cut_act.py
@@ -1,40 +1,89 @@
 from policyengine_us.model_api import *
 from policyengine_core.periods import period as period_
-from policyengine_core.periods import instant
 
 WATCA_REFERENCES = [
     {
-        "title": "Working Americans' Tax Cut Act bill summary (via Jeff Stein, WaPo)",
-        "href": "https://x.com/JStein_WaPo/status/2029621495295619363",
-    },
-    {
-        "title": "Democrat's plan would eliminate federal income"
-        " taxes for half of U.S. workers",
-        "href": "https://www.washingtonpost.com/business/"
-        "2026/03/05/middle-class-tax-relief-senate-bill/",
+        "title": "Working Americans' Tax Cut Act",
+        "href": "https://www.vanhollen.senate.gov/imo/media/doc/working_americans_tax_cut_act_bill_text.pdf",
     },
 ]
 
 
 def create_watca() -> Reform:
-    class watca_cost_of_living_exemption(Variable):
+    class watca_alternative_tax_magi(Variable):
+        value_type = float
+        entity = TaxUnit
+        label = "WATCA alternative tax modified AGI"
+        definition_period = YEAR
+        unit = USD
+        reference = WATCA_REFERENCES
+        documentation = "Section 1A(d): AGI + foreign income exclusions (sec 911, 931, 933) + non-taxable Social Security."
+
+        adds = [
+            "adjusted_gross_income",
+            "foreign_earned_income_exclusion",
+            "specified_possession_income",
+            "puerto_rico_income",
+            "tax_exempt_social_security",
+        ]
+
+    class watca_surtax_magi(Variable):
         value_type = float
         entity = TaxUnit
-        label = "WATCA cost of living exemption"
+        label = "WATCA surtax modified AGI"
         definition_period = YEAR
         unit = USD
         reference = WATCA_REFERENCES
+        documentation = (
+            "Section 59B(d): AGI - investment interest deduction (sec 163(d))."
+        )
 
         def formula(tax_unit, period, parameters):
             agi = tax_unit("adjusted_gross_income", period)
+            # Sec 163(d) limits the deduction to net investment income;
+            # PolicyEngine does not yet model that limitation, so gross
+            # investment interest expense is used as a proxy.
+            investment_interest = add(tax_unit, period, ["investment_interest_expense"])
+            return max_(0, agi - investment_interest)
+
+    class watca_alternative_tax_eligible(Variable):
+        value_type = bool
+        entity = TaxUnit
+        label = "Eligible for WATCA alternative maximum tax"
+        definition_period = YEAR
+        reference = WATCA_REFERENCES
+        documentation = "Section 1A(b): MAGI < 175% of exemption, and not claimed as dependent on another return."
+
+        def formula(tax_unit, period, parameters):
+            magi = tax_unit("watca_alternative_tax_magi", period)
             filing_status = tax_unit("filing_status", period)
             p = parameters(period).gov.contrib.congress.watca.cost_of_living_exemption
-            amount = p.amount[filing_status]
-            phase_out_end = amount * p.phase_out_multiple
-            phase_out_range = phase_out_end - amount
-            uncapped = (phase_out_end - agi) / phase_out_range
-            fraction = clip(uncapped, 0, 1)
-            return amount * fraction
+            exemption_amount = p.amount[filing_status]
+            income_limit = exemption_amount * p.income_limit_multiple
+            income_eligible = magi < income_limit
+            head_dependent = tax_unit("head_is_dependent_elsewhere", period)
+            spouse_dependent = tax_unit("spouse_is_dependent_elsewhere", period)
+            not_dependent = ~head_dependent & ~spouse_dependent
+            return income_eligible & not_dependent
+
+    class watca_alternative_max_tax(Variable):
+        value_type = float
+        entity = TaxUnit
+        label = "WATCA alternative maximum tax"
+        definition_period = YEAR
+        unit = USD
+        reference = WATCA_REFERENCES
+        documentation = (
+            "Section 1A(a): 25.5% of MAGI above the cost of living exemption."
+        )
+
+        def formula(tax_unit, period, parameters):
+            magi = tax_unit("watca_alternative_tax_magi", period)
+            filing_status = tax_unit("filing_status", period)
+            p = parameters(period).gov.contrib.congress.watca.cost_of_living_exemption
+            exemption_amount = p.amount[filing_status]
+            rate = p.alternative_tax_rate
+            return max_(0, magi - exemption_amount) * rate
 
     class watca_millionaire_surtax(Variable):
         value_type = float
@@ -43,44 +92,35 @@ class watca_millionaire_surtax(Variable):
         definition_period = YEAR
         unit = USD
         reference = WATCA_REFERENCES
+        documentation = (
+            "Section 59B: Surtax on high income individuals based on modified AGI."
+        )
 
         def formula(tax_unit, period, parameters):
-            agi = tax_unit("adjusted_gross_income", period)
+            magi = tax_unit("watca_surtax_magi", period)
             p = parameters(period).gov.contrib.congress.watca.surtax
             filing_status = tax_unit("filing_status", period)
+            # Sec 59B(c) specifies "joint return under section 6013".
+            # Surviving spouse is treated as joint here, following common
+            # IRS convention (sec 1(a)(2) treats surviving spouses as joint filers).
             joint = (filing_status == filing_status.possible_values.JOINT) | (
                 filing_status == filing_status.possible_values.SURVIVING_SPOUSE
             )
             return where(
                 joint,
-                p.rate.joint.calc(agi),
-                p.rate.single.calc(agi),
+                p.rate.joint.calc(magi),
+                p.rate.single.calc(magi),
             )
 
-    class taxable_income(Variable):
-        value_type = float
-        entity = TaxUnit
-        label = "IRS taxable income"
-        unit = USD
-        definition_period = YEAR
-
-        def formula(tax_unit, period, parameters):
-            agi = tax_unit("adjusted_gross_income", period)
-            exemptions = tax_unit("exemptions", period)
-            deductions = tax_unit("taxable_income_deductions", period)
-            watca_exemption = tax_unit("watca_cost_of_living_exemption", period)
-            return max_(0, agi - exemptions - deductions - watca_exemption)
-
     class income_tax_before_credits(Variable):
         value_type = float
         entity = TaxUnit
         definition_period = YEAR
         label = "income tax before credits"
         unit = USD
-        documentation = "Total (regular + AMT) income tax liability before credits"
 
         def formula(tax_unit, period, parameters):
-            base = add(
+            standard_tax = add(
                 tax_unit,
                 period,
                 [
@@ -89,19 +129,35 @@ def formula(tax_unit, period, parameters):
                     "alternative_minimum_tax",
                 ],
             )
+            alternative_max = tax_unit("watca_alternative_max_tax", period)
+            eligible = tax_unit("watca_alternative_tax_eligible", period)
+            # The alternative max tax cap is not separately gated by
+            # in_effect because this variable only exists when the reform
+            # is loaded, which already requires in_effect = true.
+            tax_after_cap = where(
+                eligible,
+                min_(standard_tax, alternative_max),
+                standard_tax,
+            )
             p = parameters(period).gov.contrib.congress.watca.surtax
             surtax = where(
                 p.in_effect,
                 tax_unit("watca_millionaire_surtax", period),
                 0,
             )
-            return base + surtax
+            # Known limitation: Sec 59B(e)(3) says the surtax should not
+            # be treated as tax for purposes of credits or AMT. Adding it
+            # here (before credits) means credits could offset it.
+            # Fixing this requires restructuring the tax computation chain.
+            return tax_after_cap + surtax
 
     class reform(Reform):
         def apply(self):
-            self.update_variable(watca_cost_of_living_exemption)
+            self.update_variable(watca_alternative_tax_magi)
+            self.update_variable(watca_surtax_magi)
+            self.update_variable(watca_alternative_tax_eligible)
+            self.update_variable(watca_alternative_max_tax)
             self.update_variable(watca_millionaire_surtax)
-            self.update_variable(taxable_income)
             self.update_variable(income_tax_before_credits)
 
     return reform
diff --git a/policyengine_us/tests/policy/contrib/congress/watca.yaml b/policyengine_us/tests/policy/contrib/congress/watca.yaml
index a761d242b9b..500ed7e863b 100644
--- a/policyengine_us/tests/policy/contrib/congress/watca.yaml
+++ b/policyengine_us/tests/policy/contrib/congress/watca.yaml
@@ -1,129 +1,210 @@
 # Working Americans' Tax Cut Act tests
 
-# === Cost of Living Exemption ===
+# === Alternative Maximum Tax Eligibility (Binary) ===
 
-- name: Single filer below exemption amount (full exemption)
+- name: Single filer below income limit (eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 30_000
+    adjusted_gross_income: 80_000
     filing_status: SINGLE
   output:
-    watca_cost_of_living_exemption: 46_000
+    # Income limit: 46_000 * 1.75 = 80_500
+    watca_alternative_tax_eligible: true
 
-- name: Single filer at exactly exemption amount (full exemption)
+- name: Single filer at exactly income limit (not eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 46_000
+    adjusted_gross_income: 80_500
     filing_status: SINGLE
   output:
-    watca_cost_of_living_exemption: 46_000
+    # Income limit: 46_000 * 1.75 = 80_500; AGI >= limit means not eligible
+    watca_alternative_tax_eligible: false
 
-- name: Single filer mid-phaseout (AGI = 60_500, midpoint of 46K to 80.5K)
+- name: Single filer above income limit (not eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 63_250
+    adjusted_gross_income: 100_000
     filing_status: SINGLE
   output:
-    # Phase-out range: 46_000 to 80_500 (46_000 * 1.75)
-    # fraction = (80_500 - 63_250) / (80_500 - 46_000) = 17_250 / 34_500 = 0.5
-    # exemption = 46_000 * 0.5 = 23_000
-    watca_cost_of_living_exemption: 23_000
+    watca_alternative_tax_eligible: false
 
-- name: Single filer at exactly phase-out end (AGI = 80_500)
+- name: Joint filer below income limit (eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 80_500
-    filing_status: SINGLE
+    adjusted_gross_income: 160_000
+    filing_status: JOINT
   output:
-    # Phase-out end: 46_000 * 1.75 = 80_500; fraction = 0
-    watca_cost_of_living_exemption: 0
+    # Income limit: 92_000 * 1.75 = 161_000
+    watca_alternative_tax_eligible: true
 
-- name: Single filer above phase-out (AGI >= 80_500)
+- name: Joint filer above income limit (not eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 100_000
-    filing_status: SINGLE
+    adjusted_gross_income: 165_000
+    filing_status: JOINT
   output:
-    watca_cost_of_living_exemption: 0
+    watca_alternative_tax_eligible: false
 
-- name: Joint filer below exemption (full exemption)
+- name: HOH filer below income limit (eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 50_000
+    adjusted_gross_income: 110_000
+    filing_status: HEAD_OF_HOUSEHOLD
+  output:
+    # Income limit: 64_400 * 1.75 = 112_700
+    watca_alternative_tax_eligible: true
+
+- name: Joint filer at exactly income limit (not eligible)
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 161_000
     filing_status: JOINT
   output:
-    watca_cost_of_living_exemption: 92_000
+    # Income limit: 92_000 * 1.75 = 161_000; strict < means not eligible
+    watca_alternative_tax_eligible: false
 
-- name: HOH filer at exemption amount (full exemption)
+- name: HOH filer at exactly income limit (not eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 64_400
+    adjusted_gross_income: 112_700
     filing_status: HEAD_OF_HOUSEHOLD
   output:
-    watca_cost_of_living_exemption: 64_400
+    watca_alternative_tax_eligible: false
 
-- name: HOH filer above phase-out (AGI >= 112_700)
+- name: Separate filer below income limit (eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 120_000
-    filing_status: HEAD_OF_HOUSEHOLD
+    adjusted_gross_income: 70_000
+    filing_status: SEPARATE
   output:
-    # Phase-out end: 64_400 * 1.75 = 112_700
-    watca_cost_of_living_exemption: 0
+    watca_alternative_tax_eligible: true
 
-- name: Surviving spouse filer below exemption (full exemption, same as joint)
+- name: Separate filer at exactly income limit (not eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 50_000
+    adjusted_gross_income: 80_500
+    filing_status: SEPARATE
+  output:
+    watca_alternative_tax_eligible: false
+
+- name: Surviving spouse below income limit (eligible)
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 150_000
     filing_status: SURVIVING_SPOUSE
   output:
-    watca_cost_of_living_exemption: 92_000
+    watca_alternative_tax_eligible: true
 
-- name: Separate filer below exemption (full exemption, same as single)
+- name: Surviving spouse at exactly income limit (not eligible)
   period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 30_000
-    filing_status: SEPARATE
+    adjusted_gross_income: 161_000
+    filing_status: SURVIVING_SPOUSE
   output:
-    watca_cost_of_living_exemption: 46_000
+    watca_alternative_tax_eligible: false
+
+# === Alternative Maximum Tax Calculation ===
 
-# === Taxable Income Reduction ===
+- name: Alternative max tax for single filer at 60K AGI
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 60_000
+    filing_status: SINGLE
+  output:
+    # (60_000 - 46_000) * 0.255 = 14_000 * 0.255 = 3_570
+    watca_alternative_max_tax: 3_570
 
-- name: Taxable income reduced by cost of living exemption
+- name: Alternative max tax for single filer below exemption
   period: 2026
-  absolute_error_margin: 1
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
     adjusted_gross_income: 30_000
     filing_status: SINGLE
-    taxable_income_deductions: 0
-    exemptions: 0
   output:
-    # AGI=30K < exemption=46K, so full exemption
-    # max(0, 30_000 - 0 - 0 - 46_000) = max(0, -16_000) = 0
-    watca_cost_of_living_exemption: 46_000
-    taxable_income: 0
+    # max(0, 30_000 - 46_000) * 0.255 = 0
+    watca_alternative_max_tax: 0
+
+- name: Alternative max tax for joint filer at 120K AGI
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 120_000
+    filing_status: JOINT
+  output:
+    # (120_000 - 92_000) * 0.255 = 28_000 * 0.255 = 7_140
+    watca_alternative_max_tax: 7_140
+
+- name: Alternative max tax for joint filer below exemption
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 80_000
+    filing_status: JOINT
+  output:
+    # max(0, 80_000 - 92_000) * 0.255 = 0
+    watca_alternative_max_tax: 0
+
+- name: Alternative max tax for HOH filer above exemption
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 80_000
+    filing_status: HEAD_OF_HOUSEHOLD
+  output:
+    # (80_000 - 64_400) * 0.255 = 15_600 * 0.255 = 3_978
+    watca_alternative_max_tax: 3_978
+
+- name: Alternative max tax for separate filer
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 60_000
+    filing_status: SEPARATE
+  output:
+    # (60_000 - 46_000) * 0.255 = 3_570
+    watca_alternative_max_tax: 3_570
+
+- name: Alternative max tax for surviving spouse
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 120_000
+    filing_status: SURVIVING_SPOUSE
+  output:
+    # (120_000 - 92_000) * 0.255 = 7_140
+    watca_alternative_max_tax: 7_140
 
 # === Millionaire Surtax ===
 
@@ -190,7 +271,6 @@
     adjusted_gross_income: 2_000_000
     filing_status: SURVIVING_SPOUSE
   output:
-    # Joint brackets: (2_000_000 - 1_500_000) * 0.05 = 25_000
     watca_millionaire_surtax: 25_000
 
 - name: Separate filer uses single surtax brackets
@@ -201,105 +281,272 @@
     adjusted_gross_income: 1_500_000
     filing_status: SEPARATE
   output:
-    # Single brackets: (1_500_000 - 1_000_000) * 0.05 = 25_000
     watca_millionaire_surtax: 25_000
 
-- name: Surtax disabled excludes surtax from income tax
+- name: Single filer at $6M (in 12% bracket)
   period: 2026
-  absolute_error_margin: 3
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    gov.contrib.congress.watca.surtax.in_effect: false
-    adjusted_gross_income: 5_000_000
+    adjusted_gross_income: 6_000_000
     filing_status: SINGLE
   output:
-    # (2M-1M)*0.05 + (5M-2M)*0.10 = 50K + 300K = 350K
-    watca_millionaire_surtax: 350_000
-    # Surtax computed but not included in income_tax_before_credits
+    # (2M-1M)*0.05 + (5M-2M)*0.10 + (6M-5M)*0.12 = 50_000 + 300_000 + 120_000 = 470_000
+    watca_millionaire_surtax: 470_000
 
-# === Integration: surtax flows into income_tax_before_credits ===
+- name: Single filer at exactly $1M boundary (no surtax)
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 1_000_000
+    filing_status: SINGLE
+  output:
+    watca_millionaire_surtax: 0
 
-- name: Surtax included in income_tax_before_credits
+- name: Joint filer below $1.5M (no surtax)
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 1_400_000
+    filing_status: JOINT
+  output:
+    watca_millionaire_surtax: 0
+
+- name: HOH filer uses single surtax brackets
   period: 2026
-  absolute_error_margin: 3
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
     adjusted_gross_income: 1_500_000
-    filing_status: SINGLE
+    filing_status: HEAD_OF_HOUSEHOLD
   output:
+    # HOH is not JOINT/SURVIVING_SPOUSE, so uses single brackets
+    # (1_500_000 - 1_000_000) * 0.05 = 25_000
     watca_millionaire_surtax: 25_000
 
-# === CPI Indexation (post-2026) ===
+# === Modified AGI Tests ===
 
-- name: "2027: Single filer exemption indexed to $47,200"
-  period: 2027
+- name: Alternative tax MAGI includes foreign earned income
+  period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 30_000
+    adjusted_gross_income: 70_000
+    foreign_earned_income_exclusion: 10_000
     filing_status: SINGLE
   output:
-    watca_cost_of_living_exemption: 47_200
+    # MAGI = 70_000 + 10_000 = 80_000
+    watca_alternative_tax_magi: 80_000
 
-- name: "2027: Joint filer exemption indexed to $94,400"
-  period: 2027
+- name: Alternative tax MAGI includes non-taxable Social Security
+  period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
     adjusted_gross_income: 50_000
-    filing_status: JOINT
+    tax_unit_social_security: 20_000
+    tax_unit_taxable_social_security: 5_000
+    filing_status: SINGLE
   output:
-    watca_cost_of_living_exemption: 94_400
+    # MAGI = 50_000 + (20_000 - 5_000) = 65_000
+    watca_alternative_tax_magi: 65_000
 
-- name: "2027: HOH filer exemption indexed to $66,100"
-  period: 2027
+- name: Alternative tax MAGI includes specified possession income
+  period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 50_000
-    filing_status: HEAD_OF_HOUSEHOLD
+    adjusted_gross_income: 60_000
+    specified_possession_income: 5_000
+    filing_status: SINGLE
+  output:
+    watca_alternative_tax_magi: 65_000
+
+- name: Alternative tax MAGI includes Puerto Rico income
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 60_000
+    puerto_rico_income: 8_000
+    filing_status: SINGLE
+  output:
+    watca_alternative_tax_magi: 68_000
+
+- name: Surtax MAGI reduces by investment interest
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    employment_income: 2_000_000
+    investment_interest_expense: 50_000
+    filing_status: SINGLE
+  output:
+    # Surtax MAGI = 2_000_000 - 50_000 = 1_950_000
+    watca_surtax_magi: 1_950_000
+    # Surtax = (1_950_000 - 1_000_000) * 0.05 = 47_500
+    watca_millionaire_surtax: 47_500
+
+- name: Surtax MAGI floors at zero when investment interest exceeds AGI
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 20_000
+    investment_interest_expense: 50_000
+    filing_status: SINGLE
+  output:
+    # max(0, 20_000 - 50_000) = 0
+    watca_surtax_magi: 0
+
+# === Integration: income_tax_before_credits ===
+
+- name: Eligible filer income tax capped at alternative max
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    employment_income: 60_000
+    filing_status: SINGLE
+  output:
+    # MAGI = 60K < 80_500 threshold => eligible
+    # Alternative max = (60_000 - 46_000) * 0.255 = 3_570
+    # Standard tax on ~45K taxable income > 3_570, so cap binds
+    watca_alternative_tax_eligible: true
+    income_tax_before_credits: 3_570
+
+- name: Ineligible filer tax equals standard tax plus surtax
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    employment_income: 100_000
+    filing_status: SINGLE
   output:
-    watca_cost_of_living_exemption: 66_100
+    # AGI of 100K > 80_500 threshold => not eligible, no cap applied
+    # No surtax (below $1M)
+    # income_tax_before_credits = income_tax_main_rates + cap_gains + AMT
+    watca_alternative_tax_eligible: false
+    watca_millionaire_surtax: 0
+
+# === Dependent Exclusion Tests ===
 
-- name: "2030: Single filer exemption indexed to $50,200"
-  period: 2030
+- name: Dependent claimed elsewhere not eligible for alternative tax
+  period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
     adjusted_gross_income: 30_000
     filing_status: SINGLE
+    head_is_dependent_elsewhere: true
   output:
-    watca_cost_of_living_exemption: 50_200
+    # Even though income is below limit, not eligible because claimed as dependent
+    watca_alternative_tax_eligible: false
 
-- name: "2030: Joint filer exemption indexed to $100,450"
-  period: 2030
+- name: Spouse claimed as dependent elsewhere not eligible
+  period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 50_000
+    adjusted_gross_income: 30_000
     filing_status: JOINT
+    spouse_is_dependent_elsewhere: true
   output:
-    watca_cost_of_living_exemption: 100_450
+    watca_alternative_tax_eligible: false
 
-- name: "2035: Single filer exemption indexed to $55,400"
-  period: 2035
+# === Edge Cases ===
+
+- name: Zero income filer eligible for alternative tax
+  period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 30_000
+    adjusted_gross_income: 0
+    filing_status: SINGLE
+  output:
+    watca_alternative_tax_eligible: true
+    watca_alternative_max_tax: 0
+    watca_alternative_tax_magi: 0
+
+- name: Negative AGI floors alternative max tax at zero
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: -10_000
+    filing_status: SINGLE
+  output:
+    watca_alternative_tax_eligible: true
+    # max(0, -10_000 - 46_000) * 0.255 = 0
+    watca_alternative_max_tax: 0
+
+- name: MAGI add-backs push filer over eligibility threshold
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 75_000
+    foreign_earned_income_exclusion: 6_000
     filing_status: SINGLE
   output:
-    watca_cost_of_living_exemption: 55_400
+    # MAGI = 75_000 + 6_000 = 81_000 > 80_500 threshold
+    watca_alternative_tax_magi: 81_000
+    watca_alternative_tax_eligible: false
 
-- name: "2027: Single filer phase-out end adjusts with indexed amount"
-  period: 2027
+- name: Investment interest pushes millionaire below surtax threshold
+  period: 2026
   reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
   input:
     gov.contrib.congress.watca.in_effect: true
-    adjusted_gross_income: 82_600
+    employment_income: 1_050_000
+    investment_interest_expense: 100_000
+    filing_status: SINGLE
+  output:
+    # Surtax MAGI = 1_050_000 - 100_000 = 950_000 < $1M threshold
+    watca_surtax_magi: 950_000
+    watca_millionaire_surtax: 0
+
+- name: Combined MAGI add-backs all non-zero
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 50_000
+    foreign_earned_income_exclusion: 5_000
+    specified_possession_income: 3_000
+    puerto_rico_income: 2_000
+    tax_unit_social_security: 10_000
+    tax_unit_taxable_social_security: 4_000
+    filing_status: SINGLE
+  output:
+    # MAGI = 50_000 + 5_000 + 3_000 + 2_000 + (10_000 - 4_000) = 66_000
+    watca_alternative_tax_magi: 66_000
+
+- name: Both head and spouse claimed as dependents
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    adjusted_gross_income: 30_000
+    filing_status: JOINT
+    head_is_dependent_elsewhere: true
+    spouse_is_dependent_elsewhere: true
+  output:
+    watca_alternative_tax_eligible: false
+
+# === Surtax Toggle Test ===
+
+- name: Surtax disabled via surtax.in_effect parameter
+  period: 2026
+  reforms: policyengine_us.reforms.congress.watca.working_americans_tax_cut_act.watca_reform_object
+  input:
+    gov.contrib.congress.watca.in_effect: true
+    gov.contrib.congress.watca.surtax.in_effect: false
+    employment_income: 2_000_000
     filing_status: SINGLE
   output:
-    # Phase-out end: 47_200 * 1.75 = 82_600; fraction = 0
-    watca_cost_of_living_exemption: 0
+    # Surtax variable still computes but income_tax_before_credits should not include it
+    watca_alternative_tax_eligible: false
+    watca_millionaire_surtax: 50_000