Question

Kiyara (single) is a 50 percent shareholder of Jazz Corporation (an S Corporation). Kiyara does not do any work for Jazz Corp. Jazz Corp. reported $300,000 of business income for the year (2020). Before considering her business income allocation from Jazz Corp. and the self-employment tax deduction (if any), Kiyara’s adjusted gross income was $250,000 (all employee salary). Answer the following questions for Kiyara. (Leave no answer blank. Enter zero if applicable.)

Required:
a. Assuming the income allocated to Kiyara is qualified business income, what is Kiyara’s deduction for qualified business income?
b. What is Kiyara’s additional Medicare tax liability (include all earned income)?

Answer 1

(a) $30,000

(b) $1,800

Step-by-step explanation:

(a)

Business Income allocated will be:

=
`3,00,000* 50 \ percent`

=
`150,000` ($)

Qualified Business Income

=
`150,000` ($)

For Qualified Business Income, deduction will be:

=
`150,000* 20 \ percent`

=
`30,000` ($)

(b)

Whenever your net earnings from self-employment continue to increase $200,000 whether you're a singular filer, a 0.90 percent extra free Medicare tax may very well implement.

Additional Medicare Tax Liability will be:

=
`[(250,000 + 150,000) - 200,000]* 0.90 \ percent`

=
`$200,000* 0.90 \ percent`

=
`1,800` ($)