What is the self-employment tax calculated from a flow-through income of $190,000?

What is the self-employment tax calculated from a flow-through income of $190,000?

• A. $25,995
• B. $23,217
• C. $23,295
• D. $23,643

Answer: (A)

To determine the self-employment tax on flow-through income of $190,000, it is essential to understand how self-employment tax is calculated. Self-employment tax consists primarily of Social Security and Medicare taxes owed by self-employed individuals. The tax rate for self-employment tax is currently 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. However, only the net earnings from self-employment are subject to this tax. For the purpose of calculating self-employment tax, net earnings are typically 92.35% of the total self-employment income, as the IRS permits self-employed individuals to deduct a portion of the self-employment tax when calculating their taxable income. In this case, you first calculate the net self-employment earnings as follows: 1. Calculate the net earnings: $190,000 x 92.35% = $175,465. 2. To find the self-employment tax, multiply the net earnings by the self-employment tax rate: $175,465 x 15.3% = $26,909. However, the Social Security portion of this tax applies only up to an annual wage limit ($147,

To determine the self-employment tax on flow-through income of $190,000, it is essential to understand how self-employment tax is calculated. Self-employment tax consists primarily of Social Security and Medicare taxes owed by self-employed individuals.

The tax rate for self-employment tax is currently 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. However, only the net earnings from self-employment are subject to this tax. For the purpose of calculating self-employment tax, net earnings are typically 92.35% of the total self-employment income, as the IRS permits self-employed individuals to deduct a portion of the self-employment tax when calculating their taxable income.

In this case, you first calculate the net self-employment earnings as follows:

1. Calculate the net earnings: $190,000 x 92.35% = $175,465.

2. To find the self-employment tax, multiply the net earnings by the self-employment tax rate:

$175,465 x 15.3% = $26,909.

However, the Social Security portion of this tax applies only up to an annual wage limit ($147,