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6-5

SOCIAL SECURITY AND MEDICARE

To compute paycheck deductions for Social Security.

To compute paycheck deductions for Medicare.

OBJECTIVES

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Social SecurityFederal Insurance Contributions

Act (FICA)FICA taxSocial Security taxMedicare taxmaximum taxable incomeSocial Security number

Key Terms

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Example 1Example 1

Ramiro got his first job in 2006. In that year, Social Security tax was 6.2% of income up to $94,200. Medicare tax was 1.45%. If Ramiro earned $73,210 in 2006, how much did he pay for Social Security and Medicare taxes?

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Example 2Example 2

Express the Social Security tax for 2006 as a piecewise function.

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EXAMPLE 3EXAMPLE 3

Graph the Social Security tax piecewise function from Example 2.

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Mark's Social Security tax was $3,500 during the year in the graph in Example 3. Use the graph to approximate his taxable income.

CHECK YOUR UNDERSTANDING

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EXAMPLE 4EXAMPLE 4

In 1988, Social Security tax was 7.51%, to the maximum income of $45,000. If Grace earned $51,211 in 1988, how much Social Security did she pay?

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In 1988 Ramona paid $2,853.80 in Social Security tax. What was Ramona's taxable income in 1988?

CHECK YOUR UNDERSTANDING