Rayburn is the sole owner of a dance studio. During the current year, his net self-employment income from the dance studio is $50,000. What is Rayburn 's self-employment tax?

Question

Quizplus · Accepted Answer

Rayburn's self-employment tax is calculated as follows:
- First, he multiplies his net self-employment income by 92.35% to get his self-employment earnings: $50,000 x 92.35% = $46,175
- Then, he multiplies his self-employment earnings by the current self-employment tax rate of 15.3%: $46,175 x 15.3% = $7,056.98
- However, there is a deduction for half of the self-employment tax, so Rayburn can reduce his taxable income by $3,528.49: $7,056.98 / 2 = $3,528.49
- Therefore, Rayburn's self-employment tax is $7,056.98 - $3,528.49 = $3,528.49
- This amount is then added to his federal income tax liability when he files his tax return.

Therefore, the best choice is D.

Rayburn Is the Sole Owner of a Dance Studio