Final answer:
A self-employed taxpayer can deduct only the employer-equivalent portion of the self-employment tax for Adjusted Gross Income (AGI), which is essentially 50% of the total self-employment tax they incur.
Step-by-step explanation:
The amount of self-employment tax that a self-employed taxpayer can deduct for Adjusted Gross Income (AGI) is limited to the employer-equivalent portion of the self-employment tax. In more detail, when someone is self-employed, they must pay both the employee and the employer portions of Social Security and Medicare taxes. The self-employment tax rate is effectively the sum of both portions, which translates to 12.4% for Social Security on income up to the threshold, plus 2.9% for Medicare on all self-employment income.However, for the purpose of calculating AGI, only the employer portion can be deducted. This deduction effectively halves the self-employment tax rate for the deduction calculation, allowing the taxpayer to not be taxed on their income tax for what would essentially be the employer's share if they were an employee rather than self-employed.The correct answer to the question on how much of a self-employed taxpayer's self-employment tax may be deducted for AGI is: The employer portion of self-employment tax is deductible (Option A).