Paying Taxes Practice Test 2025 – Complete Exam Prep

FICA tax, which includes Social Security and Medicare taxes, is a key component of payroll tax contributions. For the year 2023, the Social Security tax rate is 6.2% on earnings up to a maximum taxable limit of $160,200, and the Medicare tax rate is 1.45% on all earnings with an additional 0.9% applied to earnings exceeding $200,000.

For an annual salary of $165,000, here's how the FICA tax is calculated:

1. **Social Security Tax**: The maximum taxable earnings for Social Security for the year 2023 is $160,200. Therefore, the Social Security tax would be calculated as follows:

\[

160,200 \times 0.062 = 9,932.40

\]

2. **Medicare Tax**: Since the entire salary of $165,000 is below the threshold for the additional Medicare tax, the calculation for the Medicare tax remains straightforward:

\[

165,000 \times 0.0145 = 2,392.50

\]

3. **Total FICA Tax**: Adding both components together gives:

\[

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