Are medicare tax and SS tax included as part of a given tax bracket percentage?
Asked by
Evan (
810)
September 22nd, 2009
For example, in 2009 if you make between $33,950 and $82,250, and are filing as single, then you are in the “25% Tax Bracket”—but a lot of the time, on a W2, they’ll separate out “medicare” and “social security” withholdings as separate from “income tax withheld”.
So are the Medicare and Social Security a part of the total 25%, or are they withheld in addition to the 25%, meaning that you’re really paying greater than the 25% in the end??
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8 Answers
It’s not how much salary you earn. It’s your total tax liability that’s the issue. The amount you pay to SS/Medicare is not part of your taxable income.
And you’re not “paying 25%”. You’re paying 25% on the amount of your taxable income that’s over the previous bracket limit.
so.. you pay 10% on the first 8,350, then 15% on the amount between 8,350 and 33,950.. and so on?
and then you pay SS/Medicare separately all together?
How is the amount of SS/Medicare that you pay calculated?
Frim wikipedia http://en.wikipedia.org/wiki/Social_Security_(United_States) see quote below that answers your question.
The Federal Insurance Contributions Act (FICA) (codified in the Internal Revenue Code) imposes a Social Security withholding tax equal to 6.20% of the gross wage amount, up to but not exceeding the Social Security Wage Base ($97,500 for 2007; $102,000 for 2008; and $106,800 for 2009). The same 6.20% tax is imposed on employers. For each calendar year for which the worker is assessed the FICA contribution, the SSA credits those wages as that year’s covered wages. The income cutoff is adjusted yearly for inflation and other factors.
A separate payroll tax of 1.45% of an employee’s income is paid directly by the employer, and an additional 1.45% deducted from the employee’s paycheck, yielding a total tax rate of 2.90%. There is no maximum limit on this portion of the tax. This portion of the tax is used to fund the Medicare program, which is primarily responsible for providing health benefits to retirees.
What it doesn’t explain is that if you are self employed you pay all of it, your part and the part the employer usually pays. I don’t know how much you make in income, but the line about only being taxed up to a certain amount, people who make over that amount, I think it was $106,800 for 2009, see their take home paychecks go up once the obligation to SS is fufilled each year. So, if you make $160K lets say, you might stop paying SS by September.
They are additional taxes and not included in the 25%
@JLeslie So if you make 212K its as if you were paying 3.10%? Yey for regressive taxation.
@benjaminlevi
Jleslie has the spot-on answer.
The 25% is defined as your marginal tax rate and is part of your income tax, not your share of payroll taxes (FICA and Medicare as stated previously).
If the bracket is 25%, then for each additional dollar of taxable income, you will pay 25 cents in income taxes.
Think of it this way, you are paying x in income taxes. You find out you omitted adding a 1099 form for interest income paid to you by your bank and the 1099 is for $50.00. You will pay an additional $12.50 in income taxes on the amount.
This assumes that you will not hit the top level of the income tax bracket by adding the $50 to your adjusted gross income.
SRM
@benjaminlevi No, in this case it is not like that. When John Doe is retired and goes to collect his social security he will collect based on what he paid in. So the cap of what you can get per month is the same as the guy who made $106,800 even if you made $300K. You get what you give. Medicaire also is thought of as an insurance plan, and each person has the right to the same medical care under it no matter how much money they made in their lifetime. Actually with medicare you pay in much more if you are a high income earner getting the same coverage in the end.
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