Question

Which of the following statements is correct regarding the deductibility of self-employment tax for self-employed taxpayers?

1) Self-employed taxpayers can deduct the full amount of their self-employment tax.
2) Self-employed taxpayers cannot deduct any amount of their self-employment tax.
3) Self-employed taxpayers can only deduct a portion of their self-employment tax.
4) Self-employed taxpayers can choose whether or not to deduct their self-employment tax.

Answer 1

Self-employed taxpayers can only deduct a portion of their self-employment tax. They are required to pay both the employee and employer sides of the payroll tax, but can deduct the employer portion of the self-employment tax when calculating their adjusted gross income.

Step-by-step explanation:

Regarding the deductibility of self-employment tax for self-employed taxpayers, the correct statement is option 3) Self-employed taxpayers can only deduct a portion of their self-employment tax.

Self-employed taxpayers are required to pay both the employee and employer sides of the payroll tax, which includes Social Security and Medicare taxes. However, they can deduct the employer portion of the self-employment tax, which is 7.65% of their net self-employment income, when calculating their adjusted gross income.

It's important to note that self-employed taxpayers are still responsible for paying the full amount of their self-employment tax, but they can deduct a portion of it for tax purposes.