Suppose Hayden has $[tex]$149,000$[/tex] of income from work and is not self-employed. How much will Hayden have to pay in FICA taxes?
Answer (1)
Calculate the income above $118,500: $149,000 - $118,500 = 30 , 500 .
Calculate the FICA tax on the first $118,500: $118,500 \times 0.0765 = $9065.25.
Calculate the FICA tax on the income above $118,500: $30,500 \times 0.0145 = $442.25.
Calculate the total FICA tax: $9065.25 + 442.25 = \boxed{ 9507.50} .
Explanation
Understanding the Problem First, let's break down the problem. Hayden has an income of $149,000 and isn't self-employed. We need to calculate the FICA taxes Hayden has to pay, based on the given tax rates.
Calculating Income Above $118,500 The FICA tax rate is 7.65% on the first $118,500 of income and 1.45% on income above $118,500. So, we need to calculate how much of Hayden's income is above $118,500.
Finding the Difference To find the income above $118,500, we subtract $118,500 from Hayden's total income of $149,000: 149 , 000 − 118 , 500 = 30 , 500 So, $30,500 of Hayden's income is above $118,500.
Calculating FICA Tax on First $118,500 Now, we calculate the FICA tax on the first $118,500 of income at a rate of 7.65%: 118 , 500 × 0.0765 = 9065.25 So, the FICA tax on the first $118,500 is $9065.25.
Calculating FICA Tax on Income Above $118,500 Next, we calculate the FICA tax on the income above $118,500 (which is $30,500) at a rate of 1.45%: 30 , 500 × 0.0145 = 442.25 So, the FICA tax on the income above $118,500 is $442.25.
Calculating Total FICA Tax Finally, we add the two FICA tax amounts to find the total FICA tax Hayden has to pay: 9065.25 + 442.25 = 9507.5 Therefore, Hayden will have to pay $9507.50 in FICA taxes.
Final Answer In conclusion, Hayden will have to pay a total of $9507.50 in FICA taxes.
Examples
Understanding FICA taxes is crucial for both employees and employers. For instance, if you're running a small business, accurately calculating and withholding FICA taxes ensures compliance with federal laws, avoiding penalties and legal issues. On the employee side, knowing how FICA taxes are calculated helps in understanding your net pay and planning your finances effectively. This knowledge is also useful when evaluating job offers, as it provides a clearer picture of your take-home income after mandatory deductions.
