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What is social security tax and medical insurance tax?Social Security Tax & Medicare Tax

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Let’s introduce it in detail in this article Federal Insurance Contribution Act Tax(( FICA TAX), The full English name is Federal Insurance Contributions Act Tax Essence

The FICA tax will be clearly displayed in the W-2 form issued by the company.

The FICA tax mainly includes two parts: Social security tax(( Social Security TAX) and Medical insurance(( MedicareTax.

If you are a self-dployment, then the FICA tax is called ” Self-employment tax“, English is Self-Employment TAX Essence

This article will explain the FICA tax in detail, as well as the social security tax and medical insurance tax.

Demand: Unless special explanation, the author is not necessarily an expert in the topic of this article, nor does it necessarily hold a professional license.The information provided in this article is for reference only.We do not assume responsibility for any errors or omissions, and do not promise or guarantee the accuracy, integrity or practicality of any information.Check Exempt statement Essence

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What is FICA tax?What is the use of this tax?

FICA tax The full name of English is Federal Insurance Contributions Act Tax, Chinese is Federal Insurance Contribution Act Tax It was originally promoted by President Franklin Roosevelt in 1935 as part of the Social Security Law.

Its main purpose is Provide funds for the American social security and medical insurance system Essence

FICA tax consists of two parts: Social security tax(Social Security Tax) and Medical insurance(Medicare).

  • Social security tax: The tax rate for social security taxes is 12.4% Each of the employers and employees take half of each, that is, each 6.2% EssenceIf your total income exceeds one limit, the part that exceeds the limit does not need to pay social security tax.For 2023, this limited income is $ 160,200 Essence
  • Medical insurance: The tax rate for medical protection is 2.9% Each of the employers and employees take half of each, that is, each 1.45% EssenceThis tax applies to the full income of employees no matter how high.

If you are holding a company W2 table Then, the total income on the W2 table 7.65% The FICA tax that will be used to pay, which includes this includes 6.2% Social security tax plus 1.45% Medical insurance tax.Your employer will match the tax, so that the total FICA tax rate will reach 15.3%.

Therefore, for company employees, you only need to afford half of the FICA tax, and your company will help you pay the other half.

For self employed For speaking, you need to pay the whole 15.3% FICA tax, because you also bear the role of employers and employees.At this time, the FICA tax was also renamed as ” Self-employment tax“, English is Self-Employment TAX Essence

What is social insurance tax?

Social insurance tax It is mainly used to fund the Social Security program, which is a federal government retire As well as Disabled and Survivor Welfare Plan Essence

Social insurance plans are eligible Retirement As well as Disabled As well as Widow and Orphan Provide monthly allowance.

The income of taxes is used to pay for the allowance of people who currently accept these benefits, and the social insurance tax you pay during your work period will be returned to you in the form of social insurance benefits in the form of social insurance benefits.

So for the average person, Emphasizing social insurance taxes finally hopes to receive the corresponding social insurance benefits at the time of retirement Essence

When you reach 67 years old Or meet other conditions, you can start receiving social insurance benefits.

Here are several common questions about social insurance tax:

Question 1: What is the tax rate of social insurance taxes?

The total tax rate for social insurance taxes is 12.4% (2023) of the total income (2023).

If you receive salary, you personally only need to pay 6.2%of the salary amount.The other half is borne by your employer.

If you are a self-employer, such as Single Member LLC, then you may pay all social insurance taxes.Because you personally take half of the employees and half of the company.

It should be noted that not all your income needs to pay social insurance taxes.There is a limit every year, and any income that exceeds this limit no longer needs to pay social insurance taxes.

For example, in 2023, your total income of more than $ 160,200 no longer needs to pay social insurance taxes.

The following is the limit of social insurance tax in the past ten years 【source】 The

yearsLimityearsLimit
2023160,2002018128,400
2022147,0002017127,200
2021142,8002016118,500
2020137,7002015118,500
2019132,900Year 2014117,000

Question 2: As long as I pay social insurance money each year, can I receive social insurance benefits when retirement?

uncertain.

The social insurance system in the United States is adopted Work points system Essence

You must have enough Work points(Or called Quarterly) Only to receive social security benefits.

At present, you need to get at least 40 points(Equivalent to 10 years Only by work) can be eligible to receive pensions.These 40 points of English are called ” Social Security Credits“【source】Essence

These points are obtained through work and paying social security taxes Essence

You can earn the most every year to work 4 points, Specific points of acquisition will change every year.

for 2023, Your total income (GROSS Income) or net profit as a self-employer (Net Income) $ 1640 You can get it 1 point Essence

If you want to get it in 2023 4 points Then your total income or net profit needs to be reached $ 6560 Essence

Question 3: When can I start to receive social insurance benefits?

Like, you can At the age of 67 Start receiving full social insurance benefits.

But you can also choose 62 years old Start receiving early, but the amount you receive every month will be less than the full benefits.

According to data in 2023, if you start receiving at the age of 62, you can only get 30%of the full social insurance.

In addition, less than 62 years old is not allowed to receive social insurance benefits.

Question 4: How to calculate how much social insurance to receive during retirement?

The calculation of social insurance benefits is relatively complicated, mainly because you have the highest income in your work career 35 years Essence

After that, add the annual income of these 35 years before adding it, and then remove it 420 months(35 years)【source】, Seek an average monthly income ( Aime.

This average monthly income will be replaced with a three-stage welfare formula to calculate your monthly insurance amount ( Primary Insurance amounts, Referred to Pia.

step one: Calculate the average index monthly income (AIME)

Social Security Administration uses your maximum 35 -year income to calculate a “adjustment of average monthly income” (AIME).

If your work year is less than 35 years, the salary of the insufficient year will be processed by 0.

When using the income of different years, the Social Security Bureau will use a ” Adjustment index“, Reflect the impact of the rising rising.

Taking social insurance benefits from 2023 as an example, let’s take a look at how to calculate the “adjustment index”.

For wages in 2021 and 2022, bring in harmony directly according to the actual income value.

The salary before 2021 will need to be “adjusted index”.The calculation method is to divide the national average salary index in the 2021 national average salary index in 2021.

For example, when you calculate the salary of 1998, you need to find the national average salary index of 1998, which is represented by B.At the same time, find the national average salary index in 2021, which is represented by A.so,

The adjustment index of 1998 = A / B

Then, when the salary of 1998 is substituted, it is necessary to take the adjustment index (A / B) in 1998, and then substitution and sum up.

Step 2: Application of three-stage welfare formula

Then, the American Social Security Agency will substitute your AIME into a welfare formula consisting of three different percentages to calculate your basic insurance amount (PIA), which is the amount you can receive every month at a full retirement age.

PIA = n x 0.9 + (m-n) x 0.32 + (aime-m) x 0.15

Among them, M and N are two important values.Based on personal conditions and calculations, you can check American Social Security Bureau website Understand how to use M and N values.

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What is medical insurance tax?

Medical insurance, is commonly called Medicare tax It is a tax collected by the US federal government, which is the purpose of helping to fund the Medicare programs in the United States.

This plan is 65 years old The elderly, some of the elderly, some Disabled And suffer End-end renal disease People provide medical protection.

Payment of medical insurance taxes are an important guarantee for you to apply for medical insurance after retirement Essence

This Medicare medical insurance is often mentioned by people American Red Blue Card Essence

Here are several common problems about medical insurance tax:

Question 1: What is the tax rate for medical insurance taxes?

The medical insurance tax rate is 2.9% Essence

  • If you are employee You need to pay the total income in the W2 table 1.45% The other 1.45%will help you pay by your employer.
  • What if you are Self-employed You need to pay net income 2.9% Medical insurance tax (that is, the sum of employees and employers).

Different from social security tax, There is no income limit for medical insurance taxes In other words, all your salary income (or self-employed income) requires a medical insurance tax.

When your income exceeds a certain limit, you also need to afford the additional 1.8% Medical insurance tax.

Therefore, if your income exceeds a certain limit, the medical insurance tax you need to afford the burden is as follows:

  • For employees, the medical insurance tax you need to pay is 2.35% (1.45% + 0.9%).Another 2.35%is borne by your employer.
  • For self-employers, the medical insurance tax you need to pay is 4.7% (2.9% + 1.8%).

This income limit is:

  • for Single taxator, Annual income exceeds 200,000 US dollars The part of the part needs to pay this part of the additional tax;
  • for Marriage and joint taxpayer, Annual income exceeds $ 250,000 The part of the part needs to pay this part of the additional tax;
  • for Married individual taxpasters, Annual income exceeds $ 125,000 The part needs to pay this part of the additional tax.

Question 2: I pay medical insurance taxes every year.Can I meet the conditions for applying for Medicare when I retire?

uncertain.

The conditions for applying for Medicare are exactly the same as the conditions for applying for social margin.

You must get at least 40 “work points” in your life to meet the conditions for applying for Medicare.

Every year, you can get up to 4 work points through work and pay social security and medical insurance taxes, which means that you need to work for at least 10 years to meet the qualification requirements of Medicare.

Obtaining work points is not directly related to the amount of medical insurance tax paid, but is related to your annual income.

For 2023, whenever your income reaches $ 1,640 You can get it 1 work points,, You can get up to 4 points a year Essence

This means that as long as your annual income is at least $ 6,560 (that is, $ 1,640 multiplied by 4), you can get the largest 4 work points in that year, no matter how much medical insurance tax you actually pay.

Once you get 40 working points, you can apply for Medicare at the age of 65 without paying additional premiums.

If your work points are less than 40, you may need to pay a part or all Medicare Part A.

What is Medicare Part A, you can view the article we write “U.S.Red and Blue Card Detailed Explanation: Application for Medical Insurance after retirement” Essence

Question 3: If I do not meet 40 work points requirements, but my spouse is satisfied, can I apply for Medicare at the age of 65?

Yes, but there are certain conditions.

If you apply for Medicare at the age of 65, your current spouse has reached the age of enjoying social welfare or is enjoying social benefits for physical reasons, then you can also get Medicare Part A for free.Before applying, you must have been married to your current spouse for more than a year.

If you are divorced, but you are currently single, and your former spouse also meets the conditions for social welfare.At the same time, you have been married to your ex-spouse for more than 10 years, then you can also apply for Medicare.

Refine in this article

Social insurance tax and medical insurance tax are very important federal taxes.After retiring with you Social benefits as well as medical insurance Related.

Before retiring, you should save enough 40 “work points”, To meet the conditions for receiving social benefits and applying for Medicare.

If you are Company employee It is the W2 table, so, congratulations, your employer will help you bear half of the social insurance tax and half of the medical insurance tax.so, The total tax rate you need is 7.65% Essence

If you are Self-employer For example, you founded a single LLC (Single Member LLC), then you personally need to afford all net income social insurance tax (12.4%) and medical insurance tax (2.9%).so, The total tax rate you need to afford is 15.3% Essence

Social insurance tax has the highest limit There is no need to pay social insurance taxes that exceed the limit.

There is no highest limit for medical insurance tax All income needs to be paid for medical insurance taxes, and for high-income families, there will also be higher-rate medical insurance taxes.

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