Question

What is the total tax due for 2017, including self-employment tax, for Stewart, assuming that he earned $20,000 in wages, earned 24000 in self-employment income from his first business, had a loss of $10,000 from the second business, received $3,000 in interest income, and had $5,100 and non qualified dividend income?

From CCH Federal Taxation comprehensive topics

Answer 1

Stuart’s self-employment tax:

Stuart’s net earnings from self-employment are $ 12,929 ($24,000 – 10000)*0.9235
Stuart’s self-employment tax is $ 1978.137 ($12,929 *15.3% ) and the process of computation is as follows:

OASDI = $ 12,929 *12.4% = $ 1603.196
HI         = $ 12,929 * 2.9% = $    374.941
                                                $ 1978.137

Gross Income

Wages                   $ 20,000
Interest Income          3,000
Non-Qualified dividend 5100
Total                            $ 28,100

Deductions from GI
½ of self-employment tax                   ($989.0685)
100% of HI                                         ($374.941)
                                                            ($1364.0095)
AGI                                                     $ 26735.991

Greater of Standard deduction (for 2017)     ($6,200)
Personal Exemption (for 2017)                       ($3,950)
Taxable Income                                               $15,585.991

According to the schedule of 2017, tax liability is computed as follow:

$ 9,075*10%               =          $ 907.50
$6510.991*15%          =          $ 976.65
Tax Liability                =          $ 1,884.15

Total Tax Due:

Federal Tax                             $1884.15
Self-employment tax               $1798.137
                                                $3862.287

The total tax due for 2017 is $ 3862.287.