Employee's Rates • 7.65% on first $118,500 of income . 1.45% on income above $118,500 2016 FICA Tax Rates¹ Matching Rates Paid bythe Employer • 7.65% on first $118,500 paid in wages 1.45% on wages above $118,500 Self-Employed Rates • 13.3% on first $118,500 of net earnings . 2.9% on earnings above $118,500 1FICA taxes include Social Security and Medicare. The Social Security tax applies to the first $118,500 of income, while the Medicare tax applies to all income. Suppose a graphic designer earns $37,000 and is self-employed. How much will the designer have to pay in FICA taxes?
Employee's Rates • 7.65% on first $118,500 of income . 1.45% on income above $118,500 2016 FICA Tax Rates¹ Matching Rates Paid bythe Employer • 7.65% on first $118,500 paid in wages 1.45% on wages above $118,500 Self-Employed Rates • 13.3% on first $118,500 of net earnings . 2.9% on earnings above $118,500 1FICA taxes include Social Security and Medicare. The Social Security tax applies to the first $118,500 of income, while the Medicare tax applies to all income. Suppose a graphic designer earns $37,000 and is self-employed. How much will the designer have to pay in FICA taxes?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
i have no idea how to even start this problem
![# 2016 FICA Tax Rates
## Employee's Rates
- **7.65%** on first $118,500 of income
- **1.45%** on income above $118,500
## Matching Rates Paid by the Employer
- **7.65%** on first $118,500 paid in wages
- **1.45%** on wages above $118,500
## Self-Employed Rates
- **13.3%** on first $118,500 of net earnings
- **2.9%** on earnings above $118,500
---
### Notes
1. **FICA taxes include Social Security and Medicare.** The Social Security tax applies to the first $118,500 of income, while the Medicare tax applies to all income.
---
### Example Calculation
Suppose a graphic designer earns $37,000 and is self-employed. How much will the designer have to pay in FICA taxes?
To calculate:
- The designer will use the **Self-Employed Rates**.
- Since $37,000 is below $118,500, the applicable rate is 13.3%.
\[ \text{FICA taxes} = 37,000 \times 0.133 \]
(The answer should be computed and filled in the response box.)
---
### Question Help
Option available: Message instructor
---](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Febf3ad0c-32ca-4cb4-894e-baabb59d73f9%2Faad61a9f-167b-4677-be3c-36fdbf437a88%2Fr7hbe9j_processed.jpeg&w=3840&q=75)
Transcribed Image Text:# 2016 FICA Tax Rates
## Employee's Rates
- **7.65%** on first $118,500 of income
- **1.45%** on income above $118,500
## Matching Rates Paid by the Employer
- **7.65%** on first $118,500 paid in wages
- **1.45%** on wages above $118,500
## Self-Employed Rates
- **13.3%** on first $118,500 of net earnings
- **2.9%** on earnings above $118,500
---
### Notes
1. **FICA taxes include Social Security and Medicare.** The Social Security tax applies to the first $118,500 of income, while the Medicare tax applies to all income.
---
### Example Calculation
Suppose a graphic designer earns $37,000 and is self-employed. How much will the designer have to pay in FICA taxes?
To calculate:
- The designer will use the **Self-Employed Rates**.
- Since $37,000 is below $118,500, the applicable rate is 13.3%.
\[ \text{FICA taxes} = 37,000 \times 0.133 \]
(The answer should be computed and filled in the response box.)
---
### Question Help
Option available: Message instructor
---
Expert Solution
Step 1: Define FICA taxes
FICA taxes, or the Federal Insurance Contributions Act taxes, are a type of payroll tax that fund the Social Security and Medicare programs in the United States. These taxes are withheld from employees' salaries and are also contributed by employers. The FICA tax rate is fixed at a certain percentage of an employee's wages, and the resulting funds are used to provide retirement, disability, and survivor benefits through Social Security, as well as healthcare coverage for individuals aged 65 and older through Medicare.
Step by step
Solved in 3 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education