JC recently graduated from veterinary school and opened her own professional practice. Assume JC does not...

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JC recently graduated from veterinary school and opened her own professional practice. Assume JC does not...

JC recently graduated from veterinary school and opened her own professional practice. Assume JC does not qualify for the QBI deduction. This year, her net profit was $28,100.

Compute JC’s after-tax income from her practice assuming her self-employment tax is $3,970, and her marginal income tax rate is 22 percent.
What percentage of the federal tax burden on JC’s business income is represented by the self-employment tax?

business accounting

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Answer 1

Answer #1

Part 1

Net profit	28100
One-half of self-employment tax (3970*50%)	(1985)
Taxable income from practice	$26115
Tax rate	22%
Income tax	5745
Self-employment tax	3970
Total tax	9715
After-tax income	$18385

Part 2

Percentage of self-employment tax = 3970/9715 = 41%

41% of the federal tax burden on JC’s business income is represented by the self-employment tax

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Answer 2

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