1. Social Security Tax:
The Social Security tax is integral to funding support programs for retirees, disabled individuals, and survivors. In 2022, employees and employers contribute 6.2%, applied to the first $147,000 of income. Beyond this threshold, no Social Security tax is levied.
2. Medicare Tax:
Financing the Medicare health insurance program, Medicare tax comprises two components:
- Medicare Part A: This is funded through a 1.45% tax on all eligible wages. High-income earners with an annual income exceeding $200,000 (or $250,000 for married couples filing jointly) face an additional 0.9% Medicare tax.
- Medicare Part B: While supported by general revenues and beneficiary premiums, high-income earners might encounter an Income-Related Monthly Adjustment Amount (IRMAA), leading to higher premiums.
3. Federal Income Tax:
The cornerstone of income tax, federal income tax supports various government programs and services. With progressive rates, the 2022 tax brackets for single filers include:
- 10% on income up to $10,275
- 12% on income between $10,276 and $41,775
- 22% on income between $41,776 and $89,075
- 24% on income between $89,076 and $170,050
- And so forth, reaching the highest bracket of 37%.
4. State Income Tax:
State income taxes are diverse, with an average rate of around 5%. However, some states boast no income tax, while others impose high rates up to 13%. Understanding your state's specific regulations is crucial for accurate financial planning.
Comments