What will be the total deduction for social security and Medicare taxes on Lily's next monthly paycheck of $3,260 if she has already earned $29,340 this year? Social security tax is 6.2% of wages up to $106,800. Medicare tax is 1.45% of all wages.
clearly, the deduction will be
.062*3260 + .0145*3260
It will be the same for all her paychecks, since her annual earnings will fall well short of the SS cutoff point.
To calculate the total deduction for social security and Medicare taxes on Lily's next monthly paycheck, we need to follow these steps:
Step 1: Determine the annual Social Security tax deduction limit
The Social Security tax deduction limit for this year is $106,800. This means that any wages earned above this limit will not be subject to Social Security tax.
Step 2: Calculate the Social Security tax deduction
Since Lily has already earned $29,340 this year, we need to determine how much of her earnings will be subject to Social Security tax. Subtracting the annual Social Security tax deduction limit ($106,800) from her year-to-date earnings ($29,340) will give us the amount of earnings subject to Social Security tax.
Subjected earnings to Social Security tax = Lily's year-to-date earnings - Social Security tax deduction limit
= $29,340 - $106,800
However, since Lily's earnings are below the annual Social Security tax deduction limit, all of her earnings will be subject to the Social Security tax.
Step 3: Calculate the Social Security tax deduction
The Social Security tax rate is 6.2%. Multiply the earnings subject to Social Security tax by the Social Security tax rate to get the Social Security tax deduction.
Social Security tax deduction = Earnings subjected to Social Security tax * Social Security tax rate
= $29,340 * 6.2%
Step 4: Calculate the Medicare tax deduction
The Medicare tax rate is 1.45% of all wages. Multiply Lily's monthly paycheck by the Medicare tax rate to get the Medicare tax deduction.
Medicare tax deduction = Monthly paycheck * Medicare tax rate
= $3,260 * 1.45%
Step 5: Calculate the total deduction for Social Security and Medicare taxes
Add the Social Security tax deduction and the Medicare tax deduction together to get the total deduction for Social Security and Medicare taxes on Lily's next monthly paycheck.
Total deduction = Social Security tax deduction + Medicare tax deduction
Now, you can plug in the values you have mentioned in the question to calculate the final result.