Tax Savings: The President Signed the Payroll Tax Holiday Into Law
There’s great news for working taxpayers this week. On February 22, the President signed the payroll tax holiday into law extending the 2 percentage point payroll tax cut through the end of 2012.
The law maintains the lower payroll tax rate which reduced the social security tax taken out of your paycheck from 6.2% to 4.2% on income up to $110,100. In addition, if you are self-employed, you will continue to pay the reduced social security tax rate of 10.4% instead of 12.4%. The law also extends federal unemployment benefits and prevents doctors who accept medicare from taking a 27.4 percent reimbursement cut.
The payroll tax holiday extension also increases the amount new federal hires and those with less than five years as a government employee have to contribute to their pension plans in order to fund the payroll tax holiday extension and unemployment benefits.
What Does This Mean for You?
The extended payroll tax holiday prevents a tax hike that would impact 160 million working Americans and keeps an extra $1,000 per year in your pocket if you earn $50,000 per year($50,000 x 2%).
For 2012, your maximum savings will be up to $2,202($110,100 x 2%). If you are married and each of you earn at least $110,100, that is a savings of $4,404! That’s more money for you and your family.
How will that savings help you this year?