During 2019, Kyle has net income of $200,000 from consulting as an independent contractor.How much must Kyle pay for self-employment tax (rounded to the nearest dollar)?
A)$30,600
B)$21,836
C)$21,722
D)$15,300
$\begin{array}{|l|r|r|}
\hline \text { Social Security and Medicare Taxes } & \mathbf{2 0 1 9} & \mathbf{2 0 1 8} \
\hline \text { FICA Social Security tax rate } & 6.2 \% & 6.2 \% \
\hline \text { SECA Social Security tax rate } & 12.4 \% & 12.4 \% \
\hline \text { FICA Medicare tax rate } & 1.45 \% & 1.45 \% \
\hline \text { SECA Medicare tax rate } & 2.9 \% & 2.9 \% \
\hline \text { Social Security income limit } & \$ 132,900 & \$ 128,400 \
\hline \text { Medicare tax income limit } & \text { None } & \text { None } \
\hline \text { Total SECA rate below SS income limit } & 15.3 \% & 15.3 \% \
\hline \begin{array}{l}
\text { Deductible SECA rate below SS income } \
\text { limit }
\end{array} & 7.65 \% & 7.65 \% \
\hline
\end{array}$

Question

Quizplus · Accepted Answer

Kyle's self-employment tax is calculated on his net income of $200,000. The total SECA rate below the Social Security income limit is 15.3%. However, only income up to the Social Security income limit of $132,900 is subject to the full SECA tax rate. The calculation is as follows: $132,900 * 15.3% = $20,333.70 for the income under the limit. For the remaining income ($200,000 - $132,900 = $67,100), only the Medicare portion of the SECA tax applies, which is 2.9%. Therefore, $67,100 * 2.9% = $1,945.90. Adding both amounts gives $20,333.70 + $1,945.90 = $22,279.60. However, self-employed individuals can deduct half of their SECA tax when calculating their net income, effectively reducing the tax rate to 7.65% for the portion of income under the Social Security limit. This deduction does not affect the total SECA tax due but rather the income tax calculation. The correct calculation without considering the deduction for income tax purposes is $22,279.60, but since this option is not available and rounding and calculation methodology might slightly vary, the closest correct choice provided is $21,836.

During 2019, Kyle Has Net Income of $200,000 from Consulting