Final answer:
Roger can deduct $11,655 for the health insurance premium and HSA contribution for AGI. He also pays $5,381.60 for Social Security and $1,258.60 for Medicare, half of which is deductible for AGI. The deductions for the healthcare-related expenses are for AGI, while only half of the self-employment taxes are deductible.
Step-by-step explanation:
Roger, who is self-employed, can take advantage of certain deductions to reduce his taxable income. To calculate the deductions related to his healthcare costs and self-employment taxes, we will consider the premiums for the high-deductible medical insurance, contributions to a Health Savings Account (HSA), Social Security, and Medicare.
First, the health insurance premium of $6,300 can be deducted for Adjusted Gross Income (AGI) as a self-employed health insurance deduction. Additionally, the contribution of $5,355 to an HSA is deductible for AGI. Stephen's total deduction for these expenses is $6,300 + $5,355 = $11,655.
For self-employment taxes, we calculate Social Security and Medicare taxes based on his gross income. The Social Security deduction at a rate of 6.2% on $86,800 is $5,381.60, and the Medicare deduction at a rate of 1.45% on the same amount is $1,258.60. However, he can deduct 50% of these self-employment taxes when computing his AGI.
The deductions for the premiums and HSA contributions are for AGI, meaning they reduce the gross income to get to AGI. The Social Security and Medicare taxes are partially deductible for AGI because only half of the self-employment tax total is allowed as a deduction.