Problem 13-46 (LO. 6) In 2018, Maria records self-employed earnings of $135,000. Using the format illustrated in the text, compute Maria's self-employment tax liability and the allowable income tax deduction for the self-employment tax paid. Do not round intermediate computations. Round your final answers to the dollar. Maria's self-employment tax liability is $, and the allowable income tax deduction for the self-employment tax paid is $ 9,154.

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Business

Lauryn Schmidt

26 February, 06:32

Problem 13-46 (LO. 6) In 2018, Maria records self-employed earnings of $135,000. Using the format illustrated in the text, compute Maria's self-employment tax liability and the allowable income tax deduction for the self-employment tax paid. Do not round intermediate computations. Round your final answers to the dollar. Maria's self-employment tax liability is $, and the allowable income tax deduction for the self-employment tax paid is $ 9,154.

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Abril Hatfield · Answer 1

Payable tax 9.154, equal to the tax deduction 9,154

Explanation:

Net earnings from self-employment is $135.000

Multiply earnings by 92.3%

= 135.000 * 0.9235

= 124.672,5

If the amount after multiplication is in excess of $118.500, in such case the excess of amount over 118.500 should be multiplied by 2.9%

= 124.672,5 > 118.500

The difference between both amounts is 179.

Add: to the above amount tax on social security portion and medicare portion 15.3%$ on 118.500 which is the ceiling limit.

118.500 * 15.3%

=18.130.5 + 179

=18309.5

Therefore, the tax is 18309.5

Deduction of 50% on the tax can be claimed

Therefore, deduction is 9.154.

Thus, the tax payer can be benefited from the self-assessment tax deduction.