ExpertHard1 markMultiple Choice
CPA · Question 25 · Area IV: Individual Taxation
A self-employed taxpayer had net earnings from self-employment of $100,000. The self-employment tax liability is $14,130. What is the taxpayer's adjusted gross income (AGI) adjustment for this tax?
A self-employed taxpayer had net earnings from self-employment of $100,000. The self-employment tax liability is $14,130. What is the taxpayer's adjusted gross income (AGI) adjustment for this tax?
Answer options:
A.
$0
B.
$14,130
C.
$7,065
D.
$10,000
How to approach this question
Deductible part of SE Tax = 50% of the tax.
Full Answer
C.$7,065✓ Correct
Self-employed individuals are allowed an above-the-line deduction (adjustment to AGI) for one-half (50%) of the self-employment tax paid. This equalizes the treatment with employees, where the employer pays half of FICA.
Common mistakes
Deducting the full amount or treating it as an itemized deduction.
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