As you may have heard last Friday, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which “provides vital tax relief and investments in our workers that will create jobs and accelerate economic growth.”
Social Security Tax Rates Reduced
While there are a lot of things included in the bill (as usual) one of the big items is that the employee portion of the Social Security Tax will be reduced to 4.2% in 2011 (in 2010 it is 6.2%). For those of you who don’t know employees and employers both pay towards the social security fund. Employers will still be paying 6.2% in 2011.
So if you get a paycheck, it might just be a little bigger starting in 2011 – woo hoo!
While I will take the tax cut like the next guy, it does concern me a little – I mean, I am already planning on Social Security not being around when I retire, but many people aren’t. So cutting the taxes on it, while it might help people in 2011, may not be very beneficial when they are wanting to retire looking for a check from the government. From what I hear, the government is saying that this cut won’t affect our future benefits – I guess it is coming from the magic money tree.
- The limits on wages subject to SS tax is still $106,800 for 2011
- Medicare taxes remain the same for 2011
According to WhiteHouse.gov these are a couple of the other things in the bill…
- Unemployment Benefits Extended: The agreement extends emergency unemployment benefits at their current level for 13 months, preventing an estimated 7 million workers from losing their benefits over the next year as they search for jobs.
- The Child Tax Credit: The $3,000 refundability threshold established in the Recovery Act for the Child Tax Credit will be extended under the agreement, ensuring an ongoing tax cut to 10.5 million lower-income families with 18 million children.
- The Earned Income Tax Credit: The agreement continues a Recovery Act expansion of the Earned Income Tax Credit worth, on average, $600 for families with 3 or more children, and reduces the “marriage penalty” faced by working married families. Together, these enhancements to the EITC will help 6.5 million working parents with 15 million children.
- The American Opportunity Tax Credit: The new American Opportunity Tax Credit – a partially refundable tax credit that helps more than 8 million students and their families afford the cost of college – would be continued under the agreement.
If you are looking to find out more about some of the details of the newly signed 2010 Tax Act, you can find out more…
- Tax Cuts, Unemployment Insurance and Jobs
- New 2011 Tax Plan Highlights: 2% Payroll Tax Reduction, Extension of Current Tax Rates