Martha is self-employed in 2016.Her business profits are $140,000.What is her self-employment tax?
A)$21,420
B)$18,754
C)$18,130
D)None of the above.

Question

Quizplus · Accepted Answer

The self-employment tax rate is 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. However, only the first $118,500 of earnings is subject to the Social Security portion in 2016. Therefore, the tax is calculated as follows: ($118,500 * 12.4%) + ($140,000 * 2.9%) = $18,754.

Martha Is Self-Employed in 2016