Question

In 2019, Miranda records net earnings from self-employment of $146,000. She reports no other gross income. Determine the amount of Miranda’s
self-employment tax and her for AGI income tax deduction

Note: please provide answers and explanations in Word or Excel as handwritten responses are hard to read. Thank you.

Answer 1

Solution:

First we need 92.35% of Marinda's net earnings from self-employment = $146,000×92.35% = $134,831

The above net earnings in excess of $132,900 (threshold limit for 2019) are only taxable to medicare taxable at 2.9% and whole amount up to $132,900 is taxable at 15.3%

So, self-employment tax = $132,900×15.3% + ($134,831 - 132,900)×2.9%

   = 20,333.70 + $55.99

   = $20,389.70 (rounded off)

Inc. tax deduction for AGI = 50% of self-employment tax

= $20,389.70 *50%

= $10,194.85