How much Medicare contribution tax will Miguel and Leya pay?

• A. $3,040
• B. $3,420
• C. $3,800
• D. $13,300

Answer: (A)

To determine the Medicare contribution tax, it's important to understand how the tax is calculated. The standard Medicare tax rate is generally 1.45% on earned income for both employers and employees, which totals 2.9%. Individuals with high incomes may be subject to an additional 0.9% Medicare tax on earnings above certain thresholds, bringing the potential tax rate for high earners up to 2.35%.

Assuming Miguel and Leya's combined income places them within the threshold for the additional tax, the correct calculation involves applying the tax rates to their total earned income.

If the correct answer is $3,040, this suggests that their taxable income was determined in a way that reflects their earnings being subjected to the standard Medicare tax rate without exceeding the threshold for additional taxes. For instance, a total earned income of approximately $200,000 would result in a Medicare contribution tax of around $3,040, assuming the calculation used the standard rate and didn't factor in the additional tax due to high income.

Understanding tax rates and how they apply to different income levels is crucial for accurately determining tax liabilities.