Question

Married taxpayers Otto and Ruth are both self-employed and file a joint return. Otto earns $352,000 of self-employment income and Ruth has a self-employment loss of $13,500. How much 0.9 percent Medicare tax for high income taxpayers will Otto and Ruth have to pay with their 2019 income tax return?

Answer 1

Otto and Ruth will owe an additional Medicare tax of $796.50 for the 2019 tax year on their combined net self-employment income, as it exceeds the $250,000 threshold for married taxpayers filing jointly.

Step-by-step explanation:

The question relates to the additional Medicare tax that high-income taxpayers are subject to on self-employment income. For the year 2019, the Medicare tax rate was 2.9% on self-employment income, with an additional 0.9% for incomes above a certain threshold ($250,000 for married couples filing jointly). Since Otto and Ruth file jointly and Otto's income minus Ruth's loss exceeds the threshold, they will have to pay the 0.9% on the amount over $250,000.

Here's how you calculate it: Otto's income ($352,000) minus Ruth's loss ($13,500) equals $338,500 of combined net self-employment income. Since this is over the $250,000 threshold by $88,500, Otto and Ruth will owe an additional Medicare tax of 0.9% on that excess amount.

To calculate the tax amount: $88,500 x 0.9% = $796.50. Therefore, Otto and Ruth's additional Medicare tax for being high-income taxpayers will amount to $796.50 for the 2019 tax year.

Answer 2

$795.5

Step-by-step explanation:

To calculate how much 0.9% income they have to pay, the law says anybody that earns above 250000 as married couple is entitled to pay above 0.9%, so for them we will subtract the 250000 from it and also Ruth loss of 13,500

So we have;

(3520000-13500-250000)*0.9%=

$796.5