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?

1) 1,512.00
2) 84.00
3) 174.00
4) 3,132.00

Answer 1

A self-employed individual making $108,000 in 2008 would pay $174.00 in Medicare tax on income over the FICA limit of $102,000, as the Medicare tax rate is 2.9% with no wage ceiling.

Step-by-step explanation:

The question is asking how much in Medicare tax a self-employed individual will have to pay if their income is $108,000, given that the wage limit for FICA taxes was $102,000 in 2008. Since Medicare tax has no upper ceiling and is fixed at 2.9%, the entire $108,000 is subject to Medicare tax. To calculate the continuing Medicare tax, the business owner's income exceeding $102,000 should be taxed at 2.9%. This calculation is:

$108,000 - $102,000 = $6,000 (amount over the limit subject to Medicare tax)

$6,000 x 0.029 = $174.00

Therefore, the self-employed business owner would have to pay $174.00 in continuing Medicare tax on the income above the FICA limit.