Income tax remains a fairly esoteric concept. Our money is taken and given to the government, but where does it go?<\/p>\n\n\n\n
In the United States, part of your tax money goes to two social welfare taxes: the Social Security benefit and the Medicare program. These are federal programs that provide financial benefits for the country’s most vulnerable citizens: the disabled, the elderly, and children who have lost a working parent.<\/p>\n\n\n\n
Every American taxpayer pays (or helps pay) a 14.3% tax on their income that goes into these programs.<\/p>\n\n\n\n
The tax is called the FICA tax, and no matter where you work and what you earn, you will pay it in some form. So what is the FICA tax, and what does FICA pay for? Keep reading to learn how much you’ll pay and where your money goes.<\/p>\n\n\n\n
FICA stands for Federal Insurance Contributions Act (FICA), which is the law that created the FICA payroll tax<\/a>.<\/p>\n\n\n\n According to the FICA definition, it falls within the social security and Medicare tax, which pays for disability insurance, old-age survivors, and hospital insurance.<\/p>\n\n\n\n The FICA tax is characterized by variable rates and multiple taxes, which makes it one of the most confusing of all the payroll taxes<\/a>.<\/p>\n\n\n\n There are two taxes to be concerned with: social security tax and Medicare tax.<\/p>\n\n\n\n At present, the social security tax is 12.4% of which 6.2% is paid by the employer and 6.2% by the employee.<\/p>\n\n\n\n There’s also a 1.45% Medicare tax, which is split evenly between employers and employees.<\/p>\n\n\n\n The tax extends further depending on income. Employees paid more than $200,000 annually pay another 0.9% Additional Medicare Tax, which the employer doesn’t match.<\/p>\n\n\n\n Almost every employee is subject to the FICA tax. Among other taxes, the IRS has placed a minimum threshold on taxes, such as not assessing a specific tax on anyone who earns below $24,000.<\/p>\n\n\n\n With the FICA tax, the IRS instituted what’s called a taxable wage base. A taxable wage base is the maximum amount of money taxed out of a person’s total income.<\/p>\n\n\n\n Only social security taxes are subjected to a wage base limit<\/a>.<\/p>\n\n\nSocial Security Tax<\/h3>\n\n\n\n
Medicare Tax<\/h3>\n\n\n\n
Does Everyone Need to Pay FICA Tax?<\/h2>\n\n\n\n