Question

Fred got his first job in 2020. In that year, Social Security tax was 8.25% of income up to $157,700. Medicare tax was 1.5%. If Fred earned $125,000 in 2020, how much did he pay for Social Security and Medicare taxes?

Answer 1

Explanation:

To calculate the amount Fred paid for Social Security and Medicare taxes in 2020, we first need to calculate the amount of income subject to Social Security tax.

Since Fred earned $125,000, which is less than $157,700, all of his income is subject to Social Security tax.

Therefore, the amount of Social Security tax Fred paid in 2020 is:

$125,000 x 8.25% = $10,312.50

To calculate the amount of Medicare tax Fred paid in 2020, we simply multiply his income by the Medicare tax rate:

$125,000 x 1.5% = $1,875

Therefore, Fred paid a total of $10,312.50 + $1,875 = $12,187.50 for Social Security and Medicare taxes in 2020.