Which statement correctly describes how Social Security and Medicare taxes apply to wages?

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Multiple Choice

Which statement correctly describes how Social Security and Medicare taxes apply to wages?

Think of FICA taxes as the employee’s share of Social Security and Medicare taken from wages. Social Security is 6.2% on earnings up to the wage base, not on all wages. Medicare is 1.45% on all wages, with no cap. In addition, high earners pay an extra 0.9% Medicare tax once wages exceed certain thresholds. So the correct description is: 6.2% for Social Security up to the wage base, 1.45% for Medicare on all wages, plus an additional 0.9% Medicare tax for high earners. The other statements misstate one or more parts—Social Security isn’t 12.4% for an individual (that would double-count the employer), Medicare isn’t 2.9% on all wages, and there is an extra Medicare tax for high earners.

Think of FICA taxes as the employee’s share of Social Security and Medicare taken from wages. Social Security is 6.2% on earnings up to the wage base, not on all wages. Medicare is 1.45% on all wages, with no cap. In addition, high earners pay an extra 0.9% Medicare tax once wages exceed certain thresholds. So the correct description is: 6.2% for Social Security up to the wage base, 1.45% for Medicare on all wages, plus an additional 0.9% Medicare tax for high earners. The other statements misstate one or more parts—Social Security isn’t 12.4% for an individual (that would double-count the employer), Medicare isn’t 2.9% on all wages, and there is an extra Medicare tax for high earners.

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