Final answer:
Joe's self-employment tax for 2022 is calculated by adding the Social Security and Medicare taxes, totaling $22,578, based on his income of $150,000.
Step-by-step explanation:
Joe, a self-employed individual, who earns $150,000 in self-employment income, is subject to self-employment tax. To calculate the self-employment tax owed for the year 2022, one must consider both the Social Security and Medicare taxes.
The self-employment tax rate consists of 12.4% for Social Security on the first $147,000 of net earnings and 2.9% for Medicare on all net earnings.
Since 12.4% is double the employee rate (as self-employed individuals pay both the employer and the employee portions), Medicare is similarly doubled from 1.45% to 2.9%.
Calculating Joe's Social Security tax: 12.4% of $147,000 (the 2022 cap) equals $18,228. Joe's earnings exceed the Social Security tax cap, so this will be the maximum he will pay for the Social Security portion.
Calculating Joe's Medicare tax: 2.9% of his entire $150,000 income equals $4,350.
To determine Joe's total self-employment tax, we add the Social Security tax and the Medicare tax amounts: $18,228 (Social Security) + $4,350 (Medicare) = $22,578.
This is the self-employment tax Joe will owe for the year 2022.