When do you pay FICA taxes and when do you not?
FICA is taken out of your earned income but it is not taken out of your passive income.
You are correct Thomas. FICA (federal tax to fund medicare and social security) is taken out of your gross earned income. That tax is currently 7.65%. You do not pay FICA on your passive income (just think income that you earned without physically doing anything to earn it which is basically everything outside of your job). If you want to increase your wealth, focus on increasing your passive income.
FICA is paid on the first $113,700 of earned income in 2013. I may change in future years.
Nice addition to the conversation, Larry. You are correct with the FICA being capped in 2013 at $113,700 for social security, but that cap does not apply to medicare.
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