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In: Accounting

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

B)

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 2 years ago
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