Question

In 2018, an employer and employee must pay social security tax on an employee's wages up to:

a) $50,000
b) $75,000
c) $100,000
d) $128,400

Answer 1

The Social Security wage base for 2018 was set at $128,400, which is the maximum amount of an employee's wages subject to Social Security tax for that year.

Step-by-step explanation:

The maximum amount of an employee's earnings subject to the Social Security tax changes periodically to reflect changes in average wages. In the year 2018, the Social Security wage base, which is the maximum amount of earnings on which Social Security tax is imposed, was set at $128,400. This wage base is important for both employees and employers since each pays a part of the Social Security tax, typically at a rate of 6.2% for each party, totaling 12.4%. Medicare tax, however, does not have a wage base limit and remains at a rate of 1.45% for both the employee and employer, with no income ceiling.