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Moderate

Payroll Taxes

GMAT-OJ6LN8

In the year 2015, payroll taxes (Social Security and Medicar​e) are withheld from employee paychecks in the following ways. Social Security taxes are withheld at a rate of 6.2% for incomes below \$118,500. Any income earned above the maximum taxable limit of \$118,500 is not taxed for contributions to Social Security. Medicare taxes are withheld at a rate of 1.45% on income earned below a total of \$200,000. Any income earned above the limit of \$200,000 is taxed at a rate of 1.9%.

How much total payroll tax (Social Security and Medicare) would be paid by someone earning \$1 million in the year 2015?

How much income must be earned in the year 2015 to have the amount of Social Security tax equal the amount of Medicare tax?

Total payroll taxes paid on $1 million income

Amount of income for equal Social Security and Medicare taxes

Total payroll taxes paid on $1 million income

Amount of income for equal Social Security and Medicare taxes

$25,447

Total payroll taxes paid on $1 million income

Amount of income for equal Social Security and Medicare taxes

$26,347

Total payroll taxes paid on $1 million income

Amount of income for equal Social Security and Medicare taxes

$81,000

Total payroll taxes paid on $1 million income

Amount of income for equal Social Security and Medicare taxes

$234,053

Total payroll taxes paid on $1 million income

Amount of income for equal Social Security and Medicare taxes

$386,684

Total payroll taxes paid on $1 million income

Amount of income for equal Social Security and Medicare taxes

$434,053