Question

10. Trey has two dependents, his daughters, ages 14 and 17, at year-end. Trey files a joint return with his wife.
What amount of child credit will Trey be able to claim for his daughters under each of the following alternative situations?

A. His AGI is 100,000.

B. His AGI is 420,000

9. Alice is single and self-employed in 2018. Her net business profit on her Schedule C for the year is $140,000.

What is her self-employment tax liability and additional Medicare tax liability for 2018

Answer 1

Ans-10- A-His AGI is $100,000:-

Trey AGI is $100,000 which are less than threshold $ 110,000 for a joint return and both of the child are under age 17. Hence, eligible to get $1,000 for child tax credit for one child as per the provision of taxation.

B- His AGI is $420,000:-

Trey may claim a child tax credit of $0 Calculated using the steps below:-

(1)- $420,000 AGI -$110,000 Married filed jointly threshold= $310,000

(2)- $310,000 excess AGI divided by 1,000= 310

(3)-310*50= $15,500. This is the amount of the phase-out.

(4)- $2,000 allowable credit minus $15,500 =($13,500)

There will be no tax credit as his AGI is more than the Married filed jointly threshold.

9-Calculate Self-employed tax liability as shown below:-

A is single and self-employed in 2018

Net profit for the year is $140,000.

Self-employed Tax Payer's tax base calculated as shown below:-

Net profit from Schedule C is multiplied by 92.35% to ascertain tax base of tax payer.

Tax base of taxpayer= $140,000*92.35%= $129,290

Medicare tax= 2.9% on $129,290= $3,749.41

Social Security Tax Rate is 12.4% for the year 2018 (A)
(12.4% on earned income up to $128,400)	$15,921.60
Earned income above that $128,400 is not subject to Social Security Tax
Medicare Tax -2.9% on $129,290 (B)	$3,749.41
(There is no earning limit for Medicare Tax)
Self Employed Tax Liability (A+B)	$19,671.01

Therefore, A's self- employment tax liability is $19,671.01

Calculate additional Medicare tax liability as shown below:-

For the year 2018, An additional medical tax 0.9% is levied on all self- employment income that annual income exceeds $200,000.

A's income is $140,000 that is below $200,000

Therefore, the additional medicare tax is not levied.

Hence, additional medicare tax liability is $0.