Question

"What is the Social Security tax paid if Jose’s gross income is $145,780.00 for the year, assuming a Social Security tax rate of 6.2% applied to maximum earnings of $128,400 and a Medicare tax rate of 1.45% applied to all earnings?"

Answer 1

The Social Security tax paid by Jose is $7,961.20, and the Medicare tax paid is $2,115.01.

Step-by-step explanation:

To calculate the Social Security tax paid by Jose, we need to determine the portion of his gross income that is subject to Social Security tax. The maximum earnings subject to the Social Security tax is $128,400. Since Jose's gross income is higher than this limit, we use the maximum earnings as the basis for calculating the tax.

Step 1: Calculate the Social Security tax
Social Security tax = Gross income * Social Security tax rate
= $128,400 * 6.2%
= $7,961.20

Step 2: Calculate the Medicare tax
Medicare tax = Gross income * Medicare tax rate
= $145,780 * 1.45%
= $2,115.01

Therefore, the Social Security tax paid by Jose is $7,961.20 and the Medicare tax paid is $2,115.01.