What is the annual increase in tax for a salary of $54,000 if the Social Security tax is raised by 1.89%?

• A. $1,020.60
• B. $1,100.00
• C. $950.00
• D. $1,200.00

Answer: (A)

To determine the annual increase in tax due to a raise in the Social Security tax by 1.89% on a salary of $54,000, you can calculate the increase as follows.

First, convert the percentage increase to a decimal by dividing by 100, which gives you 0.0189. Next, multiply this decimal by the salary amount:

Annual increase in tax = Salary × Percentage increase

Annual increase in tax = $54,000 × 0.0189

When you calculate this, the result is approximately $1,020.60. This figure represents the additional amount that will be owed in Social Security taxes due to the increase in the tax rate.

This option reflects a precise computation of the tax impact based on the specified salary, validating why this answer is accurate and appropriate in the context of the question.