Question

In 2019, Landon has self-employment earnings of $210,000. Compute Landon’s self-employment tax liability and the allowable income tax deduction of the self-employment tax paid:

Total self-employment tax liability = ?

Self-employment tax deduction = ?

Answer 1

We are calculating Self-Employment Tax Liability and Deduction for the Year 2019.

Self Employment Tax consists of Social Security Tax and Medicare tax .

Social Security Tax is levied @ 12.4%. However for the year 2019 upper cap limit is $132900. The upper cap limit increases to $137700 for the year 2020.

Medicare Tax is levied @2.9% . Additional 0.9% is levied if the earnings exceeds $200000. There is no upper cap limit on Medicare tax.

Landon can avail half of its tax liability paid as self employment tax deduction.

Calculation.

Particulars	Amount($)
Earnings	210,000
Social Security Tax-WN1	16,480
Medicare Tax-WN2	6,180
Total Self Employment Tax Liability	22,660
Self Employment Deduction	11,330

WN1- $132900*12.4%

WN2- ($200000*2.9%)+(10000*3.8%)