From Boise Idaho.

Dear TaxMama,

Is it true that individuals with yearly incomes of $63,000+ aren't required to pay FICA, yet are eligible for Social Security benefits upon retirement, like those who have paid into it all their lives?

William

 

 

 

Dear William.

Uh, no!

In fact, ALL employees have FICA (6.2%) deducted from their wages until they earn up to $87,000 (up to $90,000 in 2005). 

And yes, employees who pay in more will receive a higher  benefit. Your SS benefits are based on the amount you've contributed.

Also, all employees have Medicare (1.45%) deducted from their paychecks, no matter how much they earn. 

There is no limit.

So someone earning a million dollars will pay $14,500 in Medicare deductions, while someone earning $30,000 will pay under $500, but they'll get the same Medicare coverage.     

So don't think the Social Security Administration is giving away money for free.

Best wishes,

Eva Rosenberg, MBA, EA