Question

Calculate the Social Security and Medicare deductions for the following employee (assume a tax rate of 6.2% on $128,400 for Social

Security and 1.45% for Medicare): (Round your answers to the nearest cent.)

Employee
Rouche
$
Cumulative earnings
before this pay period
Pay amount this
period
122,300 $

Social
Security

Medicare

Answer 1

• Social Security: $7582.60
• Medicare: $1773.35

Explanation:

You want to know the Social Security and Medicare taxes on an annual income of $122,300, given the respective tax rates are 6.2% and 1.45%.

Tax

The income is less than the Social Security maximum of 128,400, so the 6.2% tax applies to the full amount. Each tax amount is found by multiplying the income by the tax rate:

SS: $122,300 × 0.062 = $7582.60 . . . . Social Security tax

Med: $122,300 × 0.0145 = $1773.35 . . .Medicare tax