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Church Tax Developments in 1997

1. Increase in wages subject to FICA tax. The FICA tax rate (7.65% for both employers and employees, or a combined tax of 15.3%) did not change in 1997. However, the amount of earnings subject to tax increased. The 7.65% tax rate is comprised of two components: (1) a Medicare hospital insurance (HI) tax of 1.45%, and (2) an "old—age, survivor and disability" (OASDI) tax of 6.2%. There is no maximum amount of wages subject to the Medicare hospital insurance (the 1.45% "HI" tax rate). The tax is imposed on all wages regardless of amount. For 1997, the maximum wages subject to the "old—age, survivor and disability" (OASDI) portion of self—employment taxes (the 6.2% amount) increases to $65,400-up from $62,700 in 1996. Stated differently, employees who receive wages in excess of $65,400 in 1997 will pay the full 7.65% tax rate for wages up to $65,400, and the "HI" tax rate ...

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Posted:
  • January 1, 1998

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