DECA Human Resources Management Practice Exam

Which tax is part of the FICA taxes?

1. Income Tax

2. Medicare Tax

3. Sales Tax

4. Property Tax

The correct answer is: Medicare Tax

The Medicare Tax is part of the Federal Insurance Contributions Act (FICA) taxes, which also include Social Security taxes. FICA taxes are mandated federal taxes that fund specific social insurance programs, namely Social Security and Medicare. The Medicare Tax specifically helps fund the Medicare program, which provides health insurance for individuals aged 65 and over, as well as some younger people with disabilities. This tax is calculated as a percentage of wages earned and is deducted directly from employees' paychecks, along with the Social Security tax. In contrast, income tax is a separate federal tax based on an individual's earnings that goes to general government funding and is not specifically tied to FICA. Sales tax is a consumption-based tax applied to the sale of goods and services, while property tax is a local tax based on property ownership. Both sales tax and property tax are not components of FICA and do not influence the funding of Social Security and Medicare programs. This distinction underscores why the Medicare Tax is correctly identified as part of FICA taxes, while the other options are not.