March 3, 2014 Admin | March 3, 2014 What is the FICA tax? When do you pay this tax and when do you not?
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This is the tax that is taken out for social security and medicare from your payroll, you pay it on the first $117,000 of your taxes for this tax year, if you have income over that amount you do not pay anything on that part, the tax is also normally 6.2% across the board.
My bad its 6.2 on the social security part and 1.45 on the medicare part giving you 7.65 a year.
You got plenty right here, Garrett. Let’s review.
FICA is intended to help fund Social Security and Medicare. For the employee, 6.2% is taken out for Social Security and 1.45% is taken out for Medicare, equalling 7.65%. The business owner pays the half, totaling 15.3%. For the small business owner, they pay the full amount and then get a credit for half of it on their tax return.
Garrett was right on the cutoff for Social Security (there is no cutoff for Medicare). Here is the primary way you can avoid paying FICA tax. Earn passive income such as a pension, royalties from a book, dividends, capital gains, and other income that is not earned income (job). Knowledge is POWER!!!!!!