Originally Posted by
Probe
I believe it was something like that, and if I remember right, it didn't count towards the cap in SS and medicare tax that we pay (110K ish). So I think I will end up paying a lot more SS and medicare tax than I would have had I not put it in the PDAP.
You are incorrect.
Social security deductions of 6.2% apply to the first $118,500 of your income. The maximum deducted for SS for 2016 is $7,347. If you have had more than that amount deducted so far this year, assuming you have made $118,500, then something is wrong. That is a hard cap number which includes all sources of taxable income. Once you have earned $118,500, SS deductions cease.
As far as Medicare, unlike SS, there is no cap on income; it applies to all income earned. An employee pays 1.45% of his/her income up to $200,000. Once an employee earns above that threshold an additional .9% is deducted for a total of 2.35% in deductions. Employers must start deducting this additional Medicare amount on the first paycheck exceeding $200,000.