Rena and Ronald,a married couple,each earn a salary of $200,000.They will be required to pay additional payroll taxes in 2016 of

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Quizplus · Accepted Answer

The additional payroll taxes in 2016 include the Social Security tax and Medicare tax. The Social Security tax is 6.2% of the first $118,500 of earnings, so Rena and Ronald will each pay 6.2% x $118,500 = $7,347 in Social Security tax. The Medicare tax is 1.45% of all earnings, so they will each pay 1.45% x $200,000 = $2,900 in Medicare tax. Therefore, the total additional payroll taxes they will pay in 2016 is $7,347 + $2,900 = $10,247. Since they are a married couple, they can combine their incomes for tax purposes, so the total amount of payroll taxes they will pay is $10,247 x 2 = $20,494. Dividing this by their combined income of $400,000, we get a payroll tax rate of 5.12%. Multiplying this by their individual incomes of $200,000, we get $10,240, which is very close to the calculated amount of $10,247. Therefore, the best choice is B, $1,350.

Rena and Ronald,a Married Couple,each Earn a Salary of $200,000