- The Social Security tax rate is 6.2 percent of the first $106,800 of your gross pay (as of 2011). You do not pay Social Security tax on any amount above $106,800. Paying Social Security tax entitles you to receive benefits when you reach 62, as long as you have accumulated at least 40 quarters of work experience with an employer that pays Social Security tax. If you qualify, your spouse may qualify for spousal benefits of 37 to 50 percent of your benefits.
- The Medicare tax rate is 1.45 percent of your gross pay (as of 2011). There is no maximum income limit. Paying Medicare tax entitles you to receive Medicare benefits if you have worked at least 10 quarters by the time you are 65 with an employer that pays Medicare tax. If you qualify for Medicare, your spouse automatically qualifies as well.
- Your employer must deduct your estimated federal income tax from your paycheck. The amount is estimated because your annual income determines you tax rate, and there is no way to be certain what your annual income will be until the year is over. You must complete Form W-4 to authorize your employer to withhold federal income tax. Form W-4 requires you to provide information, such as your number of dependents, that will allow your employer to accurately estimate your tax burden.
- Your employer must deduct state and local income taxes from your paycheck. Every state's taxation system is different -- some states, such as Alaska and Nevada, impose no state income tax. Local taxation schemes are subject to state oversight because cities and counties are subdivisions of the state government. State and local tax rates are typically far lower than federal income tax rates.
- You wages might be garnished to satisfy a debt. Your creditor might be the IRS, a state government or a private creditor. Although government agencies generally do not need a court order to garnish your paycheck, private parties must file a lawsuit, win it and petition the court for enforcement of the judgment.
Social Security Tax
Medicare
Federal Income Tax
State and Local Taxes
Wage Garnishments
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