Social Security & Medicare Tax for Earned Income
The Federal Insurance Contributions Act, or FICA, is made up of the Social Security Tax and the Medicare Tax. For both employees and their employers, on the first $113,700 of their wages (up from $110,100 in 2012) they will each be taxed 7.65% (an increase of 2% from the prior year).
For the self-employed, they will be taxed 15.3%. The self-employed are taxed at a higher percentage because they pay the full FICA tax, while the employee and employer each contribute to the tax.
The Patient Protection and Affordable Care Act brings another increase. This only applies to wages and/or self-employed income over $250,000 for a married couple or single people making over $200,000. Once they exceed those numbers, they will be taxed an additional .9%. Again, this is only for the amount over $200,000 or $250,000.
Disclaimer: The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
