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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76406  
Subject: Re: Social Security limit Date: 8/16/1999 10:06 PM
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For Social Security, it's $72,600. You pay 6.2% of your earned income on that. For Medicare, there is no limit. You pay 1.45% of your earned income on that. If you do not work for wages, and get your money from dividends, interest, capital gains, and what not, you pay zero, zip, zilch, nada. If you work for yourself (my favorite example is a self-employed hairdresser in Roxbury, Massachusetts) you pay double what an employee does, or 15.3%.

In all cases, that's off the top. So, if you contribute 6% before taxes to your 401(k), that "before taxes" refers only to your 1040 income. That 6% will be taxed as far as Social Security is concerned.
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