How Insurance Works

Lingo: Payroll Tax

So when you got your paycheck
this week and looked at it, you would note that some of
the money was missing. Well, some of that went to
income tax withholding, and some of it went for
payroll taxes. The payroll tax is a specific
tax to support Federal programs of Social Security
and Medicare. The tax is imposed on both
employers and employees, and the total tax rate is 15.3%. If you were self-employed,
you would pay the entire 15.3% yourself. But if you have an employer, he
pays half and you pay half, and the half you pay is the
reduction in your paycheck that you see on your paystub. Your first $100,000 or so of
earned income is subject to the Social Security tax. All of your earned income is
subject to the Medicare tax. Because this tax applies only
to your earned income that could either be self-employed
or through your paycheck, we call this a payroll tax.

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