Oliver owns Wifit, an unincorporated sports store. In 2014 Wifit earned $100,000, before Oliver drew out a salary of $60,000. What is Oliver's 2014 deduction for selfemployment taxes?

Question

Oliver owns Wifit, an unincorporated sports store. In 2014 Wifit earned $100,000, before Oliver drew out a salary of $60,000. What is Oliver's 2014 deduction for self­employment taxes?

Quizplus · Accepted Answer

Oliver's self-employment tax is calculated on the net earnings from self-employment, which is $100,000. The self-employment tax rate is 15.3%, so $100,000 x 15.3% = $15,300. However, only 92.35% of the net earnings are subject to self-employment tax, so $100,000 x 92.35% x 15.3% = $14,130. Oliver can deduct half of the self-employment tax on his income tax return, which is $14,130 / 2 = $7,065.

Oliver Owns Wifit, an Unincorporated Sports Store