Exercise 13-26 (Algorithmic) (LO. 6) In 2017, Miranda records net earnings from

ID: 2513158 • Letter: E

Question

Exercise 13-26 (Algorithmic) (LO. 6) In 2017, Miranda records net earnings from self-employment of $336,700. She has no other income. In your computations round all amounts to two decimal places. Round your final answers to the nearest dollar. Miranda's self employment tax is 25,758 x and she has a 18,877 x deduction for AGI 25,758 X and she has a Feedback Check My Work The tax on self-employment income is levied to provide Social Security and Medicare benefits (old age, survivors, and disability insurance and hospital insurance) for self-employed individuals

Explanation / Answer

Solution: Miranda's self employment tax is $24,790; and she has a $12,395 deduction for AGI

Working:

Net Earnings from Self-Employment

336,700

Multiply by 92.35%

310942

Excess amount over $127,200

183742

Multiply excess by 2.9%

5328.53

Add amount from above line to 127,200 * 15.3%

24790.13

The tax payer is allowed a deduction of 1/2 of self-employment tax i.e. 24,790 * 50% = 12395.07