Question

The limit in 2008 for FICA tax was 102,000. So if a self-employed business owner makes $108,000 in one year, how much in "continuing" medicare tax will they have to pay? (Medicare tax is 1.4% for individuals and 2.9% for the self-employed.)

Answer 1

174.00 is the correct answer

Answer 2

The medicare tax will amount to $174.

Explanation:

As given, there is a self employed person who makes $108000 in a year. the limit for FICA tax was $102000, so excess amount the person makes is =

`108000-102000=6000`

Also, given is that the medicare tax for the self-employed is 2.9%, so the person will pay 2.9% or 0.029 of the excess amount. This value becomes:

`0.029*6000` = $174

So, the correct answer is $174.