Question

Use the tables to help answer the question.

Income
Up to $200,000
Over $200,000
Income
Medicare
Up to $127,200
Over $127,200
1378
Self-Employed Employed
1.45%
2.35%
2.9%
3.6%
Social Security
Self-Employed Employed
6.2%
12.4%
0%
The maximum yearly Social Security contribution for a self-employed individual is
0%
DEC
13
stv
$8,972.30
$12,341.80
$15,772.80
$7,886.40

Answer 1

The maximum yearly Social Security contribution for a self-employed individual can be calculated by multiplying the wage limit for the year by 12.4%. In 2020, the wage limit was $137,700, which would result in a maximum contribution of $17,075.60. Options provided do not match this calculation, suggesting an error or a different applicable wage limit.

Step-by-step explanation:

The student is asking how to calculate the maximum yearly Social Security contribution for a self-employed individual. To do this, one must understand that Social Security tax is imposed at a specific rate up to a maximum income level. This rate for a self-employed individual is 12.4% of their gross income, and the wage limit is set at a certain threshold which changes annually. For example, in 2020, the wage limit was set at $137,700.

To find the maximum contribution, you multiply the wage limit by the self-employment tax rate (12.4%). The calculation would be: $137,700 * 12.4% = $17,075.60. However, since the student's options don't include this figure, it's likely that a different wage limit applies based on the year in question or a typo in the provided options.

Please note that the answer would vary depending upon the specific wage limit in effect for the year you are considering. Always be sure to use the correct wage limit for the specific year in question.