Posts Tagged ‘payroll tax’

2010 Tax Relief Act – Payroll Tax Cut

On December 17, 2010, the Tax Relief , Unemployment Insurance Reauthorizations and Job Creation Act of 2010 (2010 Tax Relief Act), was signed by President Obama. The 2010 Tax Relief Act extends the Bush-era individual and capital gains/dividend tax cuts for all taxpayers for two years. The bill also provides for an AMT “patch”, a one year payroll tax cut, bonus depreciation for 2011 and 2012, a top federal estate tax rate of 35 percent with a $5 million exclusion, and more.

For most individuals , the most immediate impact of the new law will be  the payroll tax cut and  the extension of the reduced individual income tax rates.

The 2010 Tax Relief Act reduces the Social Security (FICA) portion of payroll taxes collected from employees and self-employed individuals from current 6.2 percent to 4.2 percent for 2011 only.  So what does this mean in real dollars?

If you earn the maximum amount of $106,800 that is subject to FICA tax, you will save $2,136 next year. Anyone earning less will save 2 percent of wages or net self–employed income.  See your tax professional with any questions you may have regarding the new legislation.

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