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Social Security & medicare. Gross Pay vs Net Pay. Gross Pay → What your total pay is before deductions Net Pay → The amount your paycheck is for → Also known as your “take home pay” Net Pay = Gross Pay - Deductions. Deductions. For each paycheck, you can have several deductions:
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Gross Pay vs Net Pay • Gross Pay → What your total pay is before deductions • Net Pay → The amount your paycheck is for → Also known as your “take home pay” • Net Pay = Gross Pay - Deductions
Deductions • For each paycheck, you can have several deductions: • Social Security • Medicare • Tax Withholdings • Retirement Plans • Union Dues • Many More
Social Security • Retirement benefits for people who are at least 62 • Disability benefits for workers who are disabled or unable to work • Survivors’ benefits, paid to spouses and dependent children when a social security recipient dies • Originated in 1935 at 1% • Current rate is 6.2%
Medicare • Medical insurance for some disabled people and people over 65 • Originated in 1966 at 0.35% • Current rate is 1.45% • Both Social Security and Medicare were established in the Federal Insurance Contribution Act • FICA
Social Security & Medicare • Social Security • Currently pay 6.2% of taxable income to S.S. • Maximum taxable income of $106,800 • Increasing to $110,100 next year • What is the most you could pay in Social Security Tax in one year?
Social Security & Medicare • Medicare • Currently pay 1.45% of taxable income to Medicare • No maximum • What is the most you could pay in Medicare in one year?
Example • 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 in Social Security and Medicare? Social Security Medicare = 73,210 • 0.062 = 73,210 • 0.0145 = 4,539.02 = 1,061.545 Total Withholdings = 4,539.02 + 1,061.55 = 5,600.57
Example • What are the social security and Medicare withholdings for an executive whose annual gross earnings are $98,430 in 2007, when the maximum taxable income was $97,500? Medicare Social Security = 98,430 • 0.0145 = 98,430 = 97,500 • 0.062 = 1,427.24 = 6,045 = 6,045 + 1,427.24 Total Withholdings = $7,472.24
Social Security & Medicare • Social Security • Currently pay 6.2% of taxable income to S.S. • Maximum taxable income of $106,800 • Increasing to $110,100 next year • What is the most you could pay in Social Security Tax in one year?
Social Security & Medicare • Medicare • Currently pay 1.45% of taxable income to Medicare • No maximum • What is the most you could pay in Medicare in one year?
Example • You currently earn an annual salary of $247,500. You must pay a social security tax rate of 6.2% of taxable income up to $106,800. • What is your monthly salary? • What month will you reach the maximum taxable income? • How much will you pay in social security in February?
Example • You currently earn an annual salary of $247,500. You must pay a social security tax rate of 6.2% of taxable income up to $106,800. • What is your monthly salary? • What month will you reach the maximum taxable income? • How much will you pay in social security in Nov.?
Example • You currently earn an annual salary of $247,500. You must pay a social security tax rate of 6.2% of taxable income up to $106,800. • What is your monthly salary? • What month will you reach the maximum taxable income? • How much will you pay in social security in June?
Social Security & Medicare • Page 319, 2-4
Social Security & Medicare • Maximum you could pay into S. S. each year: $1,070.85 $1,587.67 $2,170.80 $2,532.60 $3,003.00 $3,379.50 $3,924.45
Social Security & Medicare • In 1990, Jerry’s gross pay was $78,000. • What was his monthly gross pay? • In what month did he his the maximum? • How much did he pay in S.S. tax in Jan? • How much S.S. tax did he pay in Dec? $6,500 August $497.25 $0
Social Security & Medicare • In 1978, Dawn earned $48,000. • What was her monthly gross pay? • In what month did she reach the maximum Social Security income? • How much S.S. tax did she pay in Feb? • How much S.S. tax did she pay in May? • How much S.S. did she pay in Nov.? $4,000 May $242 $102.85 $0
Social Security & Medicare • Yesterday, we covered Social Security & Medicare • Social Security • Currently at 6.2% • Maximum taxable income of $106,800 • Pay a maximum of $6,621.60 • Medicare • Currently at 1.45% • No maximum taxable income
Social Security & Medicare • How much would you have to currently earn to pay as much in Medicare as you do in Social Security?
Social Security & Medicare • Today, we are going to create piecewise functions detailing Social Security & Medicare • Recall, a piecewise function looks like: 0.15 x when 0 ≤ x < 500 0.20 x when 500 ≤ x < 1500 C(x) = 0.22 x when 1500 ≤ x
Social Security & Medicare • Creating a piecewise function: • Create an algebraic expression for S.S. (and Medicare if applicable) for income less than the maximum amount • Determine total amount possible to be paid into S.S. when maximum amount is hit
Social Security & Medicare • Express the 2006 as a piecewise function: 2006: S.S. rate of 6.2% w/ max at $94,200 Medicare rate of 1.45% w/ no max
Social Security & Medicare • Express the 1999 as a piecewise function: 1999: S.S. rate of 6.2% w/ max at $72,600 Med. rate of 1.45% w/ max no max
Social Security & Medicare • Express the 2009 as a piecewise function: 2009: S.S. rate of 6.2% w/ max at $106,800 Med. rate of 1.45% w/ no max
Social Security & Medicare • Stephanie was just hired at a new job making $135,000 a year. How much will she pay in FICA taxes in her first year?
Social Security & Medicare • Stephanie was just hired at a new job making $135,000 a year. How much will she pay in FICA taxes in her first year? • In what month will she surpass the taxable income amount of $106,800 and how much will she pay in that month?
Social Security & Medicare • In 2007, the Social Security tax rate was 6.2% with a maximum taxable income of $97,500 and the Medicare tax rate was 1.45%. Express this as a piecewise function.
Social Security & Medicare • On Friday, we started working on the 6.5 worksheet. Finish this worksheet now.
Social Security & Medicare 1. Dr. Gumman got his first job in 1990. In that year, the government took out 7.45% of each income for Social Security and Medicare, until a person made $51,300. If Dr. Gumman earned $31,340 in 1990, how much did he pay to Social Security and Medicare?
Social Security & Medicare 2. Lauren earned a total of “d” dollars last year. The government took out 6.2% for Social Security and 1.45% for Medicare. Write an algebraic expression that represents what she paid to Social Security and Medicare combined.
Social Security & Medicare 3. In 1978, the Social Security and Medicare tax rate combined was 6.05% up to $17,700 earned. • Express the Social Security tax as a piecewise function. • Ten years later, the percent had increased to 7.51% and the maximum taxable income had increased to $45,000. Express this as a piecewise function. • If a person earned $50,000 in 1978 and $50,000 in 1988, what was the difference in taxes paid?
Social Security & Medicare 4. In 2010, the government took out 6.2% of earnings for Social Security to a maximum taxable income of $106,800. For Medicare, 1.45% of earnings was paid. How much money would someone have to have earned in 2010 so that their payments to Medicare were equal to their payments into Social Security?
Social Security & Medicare 5. In 1998, Lisa earned $149,461.20. The Social Security maximum taxable income was $68,400, and the Social Security percent was 6.2%. • What was her monthly gross pay? • In what month did she hit the maximum? • How much S.S. tax did she pay in May? • How much S.S. tax did she pay in July? • How much S.S. tax did she pay in June?
Social Security & Medicare 6. In 2010, for the first time since 2004 the maximum taxable income was not raised. Find the maximum a person could pay into Social Security in 2010. Rate of 6.2% w/ max income of $106,800.
Social Security & Medicare 7. Let t(x) represent the total combined Social Security and Medicare taxes for the year 2007. If x represents the income, express this total as a piecewise function. 2007: S.S. = 6.2% max @ $97,500
Social Security & Medicare 8. Mr. Jackson had 2 jobs in 2005. The first job, in which he earned $74,007, was from January to August, and the second job, in which he earned $35,311, was from August to the end of the year. At the first job, he earned $74,007. As a result, he paid too much Social Security tax. How much should be refunded?
Social Security & Medicare 9. In 2009, Dr. Kirmser’s gross pay was $381,318.60. S.S. = 6.2% max @ $106,800 • What was her monthly gross pay? • In what month did she hit the maximum? • How much S.S. tax did she pay in Feb.? • How much S.S. tax did she pay in Sept.? • How much S.S. tax did she pay in April?
Social Security & Medicare • So far, we have: • Calculated total FICA taxes • Determined when you over surpass the maximum taxable income • Created piecewise functions for FICA taxes • Today: • Graph these FICA taxes
Social Security & Medicare • In 2006, the social security tax rate was 6.2% of income up to $94,200. Graph this function: • What units would make sense to label the x-axis (income)? • What units would make sense to label the y-axis (Social Security tax)?
Social Security & Medicare • In 1991, the Social Security tax rate was 6.2% on income up to $53,400. Create a piecewise function for this and graph the function.
Social Security & Medicare 10. If x represents income, express the Social Security function s(x) for 2005 as a piecewise function. Maximum taxable income of $90,000 Social Security = 6.2%
Social Security & Medicare b. Graph the Social Security function for 2005.
Social Security & Medicare c. Find the coordinates of the cusp.
Social Security & Medicare d. If x represents income, what is the Medicare function m(x) for 2005?
Social Security & Medicare d. Graph the Medicare function for 2005 on the same axes as the Social Security function in part b.