21 Feb Do You Pay More In Payroll Tax Or Income Tax?
Do you pay more in payroll tax or income tax? The answer may surprise you…
Tax season isn’t many people’s favorite time of the year. Employees typically worry about how much they will have to pay in income tax every spring, but is that really where they pay the most?
It can be confusing to rate American tax payments by only income taxes. So many workers also pay payroll taxes all year long. These payments are being made to help float Medicare and Social Security. The people that pay the most to payroll taxes are the low income and medium income workers. The high-income workers pay less in these payroll taxes as there is a payroll tax cap around $120,000 annually.
When you look at a breakdown of income and payroll taxes being paid across the nation last year, something might seem off.
According to The Tax Policy Center:
44 percent of households will not pay federal income tax this year. But 60 percent of those households have members who work and will pay Social Security and Medicare payroll taxes.
So you might be asking yourself, how much does the average American worker end up paying in taxes every year, including his or her portion of payroll taxes and federal and state income taxes?
Group 1 = 18%
pay neither income tax nor payroll tax
Group 2 = 7.2%
pay income tax but not payroll tax
Group 3 = 12.6%
pay income tax greater than payroll tax
Group 4 = 35.9%
pay payroll tax greater than income tax
Group 5 = 26.4%
pay payroll tax but no income tax
The next time you worry that income tax season is right around the corner, think twice. When all is said and done, nearly three-fourths of households across the country that pay both income tax and payroll tax will end up paying more into payroll taxes.
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About Accounting & Business Partners
Accounting & Business Partners is a CPA firm with an efficient bookkeeping department. We believe that success lies in numbers. However, the drive behind the numbers is what truly matters. That’s why we look beyond the financial statements.