Karl has a small farm with a net income of $$34,400.$ He also earns $$41,000$ before taxes from his off$-$farm job at a newspaper company. While Federal Insurance Contributions $($FICA$)$ or payroll Taxes are withheld on his salaried income is withheld by his employer, Karl still has to pay self$-$employment taxes on his farm income. $92\mathrm{.}35\%$ of net farm income is subject to self$-$employment taxes. A $12\mathrm{.}4\%$ rate applies to the first $$132,900$ of his total taxable income for social security and a $2\mathrm{.}9\%$ rate applies to all taxable income for Medicare.

i$.$ How much of Karl$$s farm income is taxed for Social Security?

a$.$ $$75,400$

b$.$ $$31,768$

c$.$ $$37,250$

d$.$ $$34,400$

e$.$ None of the above

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ii$.$ Calculate the total payroll taxes that Karl will pay on his farm income?

a$.$ $$7,997$

b$.$ $$5,263$

c$.$ $$5,699$

d$.$ $$4,861$

e$.$ None of the above

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iii. The IRS allows tax payers to claim and income tax deduction equal to $50\%$ of self$-$employment taxes paid. Calculate the deduction that Karl can claim.

a$.$ $$2,632$

b$.$ $$2,381$

c$.$ $$2,430$

d$.$ $$2,805$

e$.$ None of the above

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iv$.$ For high income earners, there is an additional Medicare tax of $0\mathrm{.}9\%$ that applies to income above $$250,000.$ By how much can Karl$$s farm income increase before the additional Medicare tax would apply?

a$.$ $$209,000$

b$.$ $$174,600$

c$.$ $$191,913$

d$.$ $$216,500$

e$.$ None of the above

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