Question
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).
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