Jack Stewart is an employee of Dr. Sloan’s medical practice, where he earns a salary of...

Jack Stewart is an employee of Dr. Sloan’s medical practice, where he earns a salary of $100,000 in 2019. He also runs his own business on the side and earns $50,000 of net self-employment income in 2019. How much Self-Employment (SE) tax does Jack owe for 2019 related to his $50,000 self-employment income?

Considering the SE tax you calculated for Jack Stewart in the previous question, and also that Jack, who files single, paid $4,000 in student loan interest and made a $7,000 cash contribution to a qualified charity, what is Jack’s 2019 AGI? (His gross income was $150,000) (12 points)

Solutions

Expert Solution

a) Your total self-employment tax of $7,065 is comprised of $5,726 Social Security tax (12.4%)and $1,339 Medicare tax(2.9%). The tax-deductible portion for Form 1040 is $3,532.

Self-Employment Tax Analysis	Social Security	Medicare
'Adjusted' earnings	$50,000	$50,000
Less: self-employment adjustment	$3,825	$3,825
Taxable self-employment earnings	$46,175	$46,175
Self-employment tax	$5,726	$1,339
Total self-employment tax	$7,065
Tax-deductible portion	$3,532

NOTE -Student loan interest

Student loan interest deduction is capped at $2,500. If you are a Single filer, you are not eligible for the deduction if your total income is greater than $80,000 ($165,000 for married filing jointly).

ekkarill92 answered 1 year ago

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