There are certain things that will affect your take-home pay from your paycheck. It’s important to understand these things in order to adequately budget for your expenses as well as savings for now as well as for the future. One of the key pieces of these deductions is the Social Security Wages for FICA tax. FICA is the Federal Insurance Contributions Act. It is a federal law that requires the withholding of Social Security Tax and Medicare Tax at a flat percentage rate.
By understanding how these taxes work, you will better understand how the system as a whole works. You may need to partake of these services at some point in your life and will be grateful for them later on when you retire or should you become disabled.
Things to keep in mind about the Social Security Wages for FICA:
1) The two taxes are different percentages.
The Social Security Tax is 6.2 percent of your wages and the Medicare Tax is 1.45 percent of your wages. People who are self-employed definitely need to keep this information in mind as they work and complete their taxes. This is because they will need to pay double the percentages for each tax because they are both the employee as well as the employer.
2) The Social Security Tax has a cap, but the Medicare Tax does not.
The cap for the Social Security Tax in 2017 is $127,200. If you make over $250,000, you will be taxed an additional 0.9 percent Medicare surtax.
3) They are based on amounts paid to employees.
These FICA taxes are paid by both employees as well as their employers. They are also payroll taxes and based on the gross amount that are paid to employees. This includes both salaried as well as hourly employees. If you work in the United States as an employee, these taxes will affect your paycheck.
4) What these taxes cover.
It’s important to keep in mind what these Social Security wages for FICA tax and Medicare taxes cover and how they can benefit you during your life. Generally speaking, these taxes provide benefits for those who are disabled, those who are retired and the children of deceased workers. Medicare provides hospital insurance benefits for those who are elderly. Please contact us with any questions.