How Much Will the Payroll Tax Cut Extension Save You?

The 2-percentage-point reduction in Social Security taxes paid by workers in 2011 was extended for the first 2 months of 2012. Congress will try to extend the reduction for the balance of 2012. Assuming that this gets done, this means you pay only 4.2% in Social Security taxes on wages up to $110,100 in 2012. However, for Social Security benefit purposes, you are effectively credited with payments at the rate of 6.2%.

What does the rate reduction meant to you? Use the Tax Policy Center’s Payroll Tax Calculator 2012 to figure your taxes compared to 2011, based on a 2-month or annual reduction extension.

Source: www.taxpolicycenter.org/taxfacts/payroll-tax-calculator.cfm