Question

Using the payroll tax rates discussed in the text and the maximum taxable wage bases for...

Using the payroll tax rates discussed in the text and the maximum taxable wage bases for 2003 of $87,000, calculate the payroll tax (OASDI and HI combined) that would be paid by the employee and employer for each of the following amounts (a) 20,000; (b) 35,000; (c) 50,000; (d) 100,000; and (e) 150,000.

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Answer #1

Solution :- Maximum Taxable earnings = $87,000

OASDI Tax Rate = 12.4%

HI Tax Rate = 2.9%

(a) In case of $20,000

OASDI Tax = 12.4% * $20,000 = $2,480

HI Tax = 2.9% * $20,000 = $580

Total Payroll tax = $3,060

(b) In case of $35,000

OASDI Tax = 12.4% * $35,000 = $4,340

HI Tax = 2.9% * $35,000 = $1,015

Total Payroll tax = $5,355

(c) In case of $50,000

OASDI Tax = 12.4% * $50,000 = $6,200

HI Tax = 2.9% * $50,000 = $1,450

Total Payroll tax = $7,650

(d) In case of $100,000 ( Maximum taxable earnings $87,000 )

OASDI Tax = 12.4% * $87,000 = $10,788

HI Tax = 2.9% * $87,000 = $2,523

Total Payroll tax = $13,311

(e) In case of $150,000 ( Maximum taxable earnings $87,000 )

OASDI Tax = 12.4% * $87,000 = $10,788

HI Tax = 2.9% * $87,000 = $2,523

Total Payroll tax = $13,311

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