Russell Bell is a painter. He has no income he would report on line 1a or line 1b of his Schedule SE*

He earned $156,970 last year from his paintings. He had $9,915 in expenses. (Note: He records his net profit in line 2, where it says “Net profit or (loss).”) You do not need to know which schedule or form it comes from, and he is not a minister or member of a religious order. He also does not get a deduction for one-half of self employment tax. How much self-employment tax does he owe (line 12)? Round to the nearest dollar.



To calculate the self-employment tax for Russell Bell, we follow these steps:

1. **Calculate Net Earnings from Self-Employment**:
   - Net profit from his paintings: \$156,970 (income) - \$9,915 (expenses) = \$147,055
   - Net earnings for self-employment tax purposes are 92.35% of this net profit:
     \[
     \text{Net Earnings} = 147,055 \times 0.9235 = 135,862.89
     \]

2. **Calculate Self-Employment Tax**:
   Self-employment tax consists of:
   - Social Security tax (12.4% on earnings up to the limit for the year)
   - Medicare tax (2.9% on all net earnings)

   **a. Social Security Tax**: 
   For 2023, the maximum taxable earnings for Social Security are \$160,200.
   Since Russell’s net earnings (\$135,862.89) are below this limit, the entire amount is subject to the 12.4% Social Security tax:
   \[
   \text{Social Security Tax} = 135,862.89 \times 0.124 = 16,846.99
   \]

   **b. Medicare Tax**: 
   All net earnings are subject to the 2.9% Medicare tax:
   \[
   \text{Medicare Tax} = 135,862.89 \times 0.029 = 3,940.03
   \]

3. **Total Self-Employment Tax**:
   The total self-employment tax is the sum of Social Security and Medicare taxes:
   \[
   \text{Total SE Tax} = 16,846.99 + 3,940.03 = 20,787.02
   \]

Rounding to the nearest dollar, the self-employment tax that Russell Bell owes is **\$20,787**.

---

Would you like any details or have further questions?

Here are five related questions:
1. How does the self-employment tax differ for different income levels?
2. What is the self-employment tax rate for someone with higher income?
3. How are net earnings for self-employment calculated from gross income?
4. Is there a way to reduce self-employment taxes for small business owners?
5. What is the maximum Social Security tax limit for future years?

**Tip**: Self-employed individuals can typically deduct half of their self-employment tax on their income tax return, though Russell does not take this deduction here.

Russell Bell is a painter. He has no income he would report on line 1a or line 1b of his Schedule SE. He earned $156,970 last year from his paintings. He had $9,915 in expenses. He records his net profit in line 2, where it says 'Net profit or (loss).' You do not need to know which schedule or form it comes from, and he is not a minister or member of a religious order. He also does not get a deduction for one-half of self-employment tax. How much self-employment tax does he owe (line 12)? Round to the nearest dollar.

This problem walks through the self-employment tax calculation for Russell Bell, a painter with $156,970 in earnings and $9,915 in expenses. Learn how to calculate net earnings, apply Social Security and Medicare tax rates, and determine the total tax due. Suitable for college-level learners or advanced high school students.

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