Question

In 2019. Landon has self-employment earnings of $214,000. Required: Compute Landon's self-employment tax liability and the allowable income tax deduction of the self- employment tax paid. (Round your intermediate computations and final answers to the nearest whole dollar value.) Total self-employment tax liability Self-employment tax deduction

Answer 1

Landon has self employment earnings of $214,000.

In general, anytime the wording "self-employment tax" is used, it only refers to Social Security and Medicare taxes and not any other tax (like income tax). Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves.

Self-employed persons are taxed on their net self-employment income i.e. the left over amount after they enter their earnings and deduct their qualifying business expenses on Schedule C, "Profit or Loss From Business.

Self-employed tax rate for 2019 is 15.3%, which encompasses the 12.4% Social Security tax and the 2.9% Medicare tax. Self-employment tax applies to your net earnings.

Particulars	Amount	Amount
Total self-employment tax liability
Social Security Tax @ 12.4% on First $132,900 of Earnings	16,480
Medicare Tax @ 2.9%, $214,000 less $ 16480 = $197520 * 2.9%	5,728	22,208
Self Employment Tax Deduction
Half of the SE Tax ( Tax Deductible Portion)		(11,104)
Final Tax Liability		11,104