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What Is And How To Calculate FICA Taxes Explained, Social Security Taxes And Medicare Taxes - YouTube

Channel: Whats Up Dude

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fica taxes are made up of two different

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types of taxes social security taxes and

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medicare taxes we're going to go through

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the tax rates for each of these and then

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we'll go through an example of how to

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calculate them starting with social

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security taxes as of 2022 the current

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social security tax rate is 6.2 percent

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for employees and 6.2 percent for

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employers totaling a rate of 12.4

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percent this rate does have a tax cap or

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limit the maximum amount of income

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subject to the social security tax is

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one hundred forty seven thousand dollars

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in two thousand twenty two the formula

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for calculating this tax for an employee

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is social security tax equals gross

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earnings times six point two percent as

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a quick example if someone earns one

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hundred thousand dollars their social

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security tax would be one hundred

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thousand dollars times six point two

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percent which must be changed to a

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decimal by dropping the percent sign and

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moving the decimal two places to the

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left to get point zero six two so one

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hundred thousand dollars times point

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zero six two which equals six thousand

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two hundred dollars so the employee

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would pay six thousand two hundred

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dollars and the employer would also pay

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six thousand two hundred dollars

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the maximum that an employee can pay

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would be the tax cap of one hundred

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forty seven thousand dollars times six

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point two percent or point zero six two

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which equals nine thousand one hundred

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fourteen dollars

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now for medicare taxes as of 2022 the

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current medicare tax rate is 1.45 for

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employees and 1.45 for employers

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totaling a rate of 2.9 percent this rate

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does not have a tax cap or limit and

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there is an additional medicare tax for

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high income earners single employees

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whose wages exceed two hundred thousand

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dollars are subject to a 0.9 percent

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additional medicare tax if a married

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couple files a joint return it's two

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hundred and fifty thousand dollars and

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if a married couple files separately

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it's one hundred and twenty five

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thousand dollars

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the employer does not need to pay the

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additional 0.9 percent

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the formula for calculating this tax is

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medicare tax equals gross earnings times

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one point four five percent as a quick

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example if someone earns one hundred

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thousand dollars their medicare tax

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would be one hundred thousand dollars

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times one point four five percent which

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must be changed to a decimal by dropping

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the percent sign and moving the decimal

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two places to the left to get point zero

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one four five so one hundred thousand

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dollars times point zero one four five

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which equals one thousand four hundred

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fifty dollars and again the employer

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would also pay one thousand four hundred

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fifty dollars

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for a single or non-married earner that

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has a high income say two hundred thirty

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three thousand dollars the formula would

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be medicare tax equals gross earnings

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times one point four five percent plus

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the quantity gross earnings minus two

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hundred thousand dollars times zero

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point nine percent for two hundred

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thirty three thousand dollars this would

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be medicare tax equals two hundred

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thirty three thousand dollars times one

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point four five percent or point zero

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one four five plus the quantity two

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hundred thirty three thousand dollars

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minus two hundred thousand dollars times

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zero point nine percent or point zero

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zero nine i've done the calculations on

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the screen and this totals to 3 675

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and 50 cents in medicare taxes

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as an example let's say that an employee

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earns 44

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278 dollars in a year so not a high

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income earner what is their total fica

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taxes their social security taxes and

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their medicare taxes

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using our formula for social security

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taxes we have forty four thousand two

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hundred seventy eight dollars times

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point zero six two which equals two

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thousand seven hundred forty five

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dollars and twenty four cents and for

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medicare taxes we have forty four

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thousand two hundred seventy eight

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dollars times point zero one four five

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which equals six hundred forty two

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dollars and three cents

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and their total fica taxes would be two

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thousand seven hundred forty five

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dollars and twenty four cents plus six

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hundred forty two dollars and three

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cents which equals three thousand three

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hundred eighty seven dollars and twenty

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seven cents and here is another example

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on the screen for you for a high wage

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earner with all of the calculations

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written out

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and a couple of notes for self-employed

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persons since they do not have an

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employer to match their tax

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contributions for either social security

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taxes or medicare taxes they must pay

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the full tax rates

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so for social security taxes they must

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pay a rate of 12.4 percent again with a

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tax cap of a hundred and forty seven

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thousand

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and for medicare taxes they must pay the

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full 2.9 percent and the 0.9 percent

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rate for earnings over 200 000

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still applies

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and here is another example on the

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screen for you that is self-employed

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all right my friends hopefully you got

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something out of this video i do have

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