Laurie expects to make $100,000 in 2007. Her social security tax rate is 6.20% up to the wage base, Medicare is 1.45%. How much FICA is Laurie expected to pay for the year?
To calculate the FICA (Federal Insurance Contributions Act) taxes that Laurie is expected to pay for the year, you need to calculate the social security tax and the Medicare tax separately.
1. Calculate the social security tax:
The social security tax rate is 6.20% up to the wage base. The wage base is the maximum annual income subject to social security tax. For 2007, the wage base is $97,500.
Multiply Laurie's expected income ($100,000) by the social security tax rate (6.20%):
Social Security Tax = $100,000 × 0.0620
2. Calculate the Medicare tax:
The Medicare tax rate is a flat 1.45% on all income; there is no wage base limit.
Multiply Laurie's expected income ($100,000) by the Medicare tax rate (1.45%):
Medicare Tax = $100,000 × 0.0145
3. Calculate the total FICA taxes:
Add the social security tax and the Medicare tax together to get the total FICA taxes:
Total FICA Taxes = Social Security Tax + Medicare Tax
Now let's calculate the values:
Social Security Tax = $100,000 × 0.0620
Social Security Tax = $6,200
Medicare Tax = $100,000 × 0.0145
Medicare Tax = $1,450
Total FICA Taxes = $6,200 + $1,450
Total FICA Taxes = $7,650
Therefore, Laurie is expected to pay $7,650 in FICA taxes for the year 2007.