Question

calculate the social security and medicare tax that would be applied to an annual salary of $125,000. use $106,800 for maximum taxable earnings. (soc sec 6.2% taxed up to $106,800 and medicare 1.45%).
a. social security tax: $77,500.00; medicare tax: $18,125.00
b. social security tax: $7,750.00; medicare tax: $1,812.50
c. social security tax: $66,216.00; medicare tax: $18,125.00
d. social security tax: $6,621.60; medicare tax: $1,812.50
please select the best answer from the choices provided

Explanation:

Step1: Calculate Social Security Tax

The Social Security tax rate is 6.2% and is applied up to $106,800. So we calculate \( 0.062\times106800 \).
\( 0.062\times106800 = 6621.6 \)

Step2: Calculate Medicare Tax

The Medicare tax rate is 1.45% and is applied to the entire salary of $125,000. So we calculate \( 0.0145\times125000 \).
\( 0.0145\times125000 = 1812.5 \)

Answer:

d. Social Security tax: $6,621.60, Medicare tax: $1,812.50