12/9/2023 0 Comments Canada tax brackets 2022![]() ![]() Multiply your net earnings by 92.35% to determine the amount of income subject to FICA taxes. To calculate, deduct your business expenses from your gross income to arrive at your net earnings.However, this is levied against 92.35% of your net earnings. If you’re self-employed, you’re responsible for the entire FICA tax (both the employee and employer portions).To calculate, take your gross income (prior to any deductions) and multiply it by the respective rates for Social Security and Medicare.Ģ.As an employee, you only pay half of the total FICA tax rate (i.e., 6.2% for Social Security and 1.45% for Medicare), and your employer pays the other half.For the most accurate information, always refer to the current IRS guidelines or consult with a tax professional. It’s important to remember that while the overall FICA tax amount may be the same for self-employed individuals and those receiving W2s, the process and calculations involved differ. This tax is paid entirely by the employee with no employer contribution.An additional Medicare tax of 0.9% is applied to individuals earning over $200,000 or couples filing jointly and earning over $250,000.A tax deduction is then allowed for half of this self-employment tax amount, reducing the individual’s adjusted gross income and thereby reducing overall income tax.This accounts for the portion that would typically be paid by an employer. However, the tax is applied to 92.35% of net earnings, not gross income.Self-employed individuals must pay the full 15.3% tax rate, as there is no employer to share the cost.The employer then matches this amount, contributing the same towards the employee’s FICA taxes. For the employee, this amount is calculated based on gross income.This means 7.65% is deducted from the employee’s paycheck, and the employer pays the other 7.65%. ![]() Employers and employees each pay half of the total FICA tax rate.This brings the total FICA tax rate to 15.3%. There is no income limit for the Medicare tax. The Medicare tax rate is 2.9% and applies to all earned income.This limit, known as the wage base limit, changes yearly based on inflation and was $142,800 as of 2021. The Social Security tax rate is 12.4% of the employee’s gross income, up to a certain income limit. ![]()
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