Tax Act 2010: Social Security Tax Reduced in 2011

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. ;)

Also…

  • 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…















FTC Disclosure of Material Connection: In order for us to maintain this website, some of the links in the post above may be affiliate links. Regardless, we only recommend products or services we use personally and/or believe will add value to readers. Read more here.

7 Comments
Add a comment
  1. I share your concern as to what may happen down the road. A country cannot continue to run deficits the way we have been, and cut taxes at the same time. It’s the equivalent of running up credit card debt, and taking a pay cut at the same time, in ‘normal land’.

  2. Something else to consider…

    While the 2% will help our paychecks, it does nothing for employers. The rate they pay is the same, which means no break for them. A decrease on the employer side might encourage more employer spending (…possibly more hiring), but with so much uncertainty about taxes for businesses in the future, it’s no wonder why the unemployment rate isn’t dropping.

  3. Totally agree that I’d love to opt out of SS if I could! However, like many government services and programs it has the right idea behind it- plan for the future for people who don’t plan for the future. Seems like a lot of programs, like unemployment benefits, were started with a decent idea but because of, well, SIN to be truthful, we derail and take advantage of a would-be good thing. Now we’ve, in my opinion, given people more reason to not search for a job. It’s sad that for some of these gov’t programs to work you need heavy case management and big brother looking over their shoulders to make sure they’re following how the program was intended. Well I’ll jump off my soap box now. I work with low-income people to help with housing and it’s incredibly sad to me how many have found ways to milk the system. Not placing all the blame there by any means but it’d shock some people to see how easy it is to take advantage of every gov’t program.

  4. First of all, a 2% tax cut for employers would do very little to nothing in terms of hiring especially since the cut is only for 1 year. However, considering that those that make less than 50k a year typically this is by far and away the largest piece of their tax level for the year this will have a significant impact on the money in people’s pockets this year which will mean more spending which WILL mean more jobs.

    Also, as for Social Security not being around, you might want to do some research on this mistruth, as is Social Security not only pays for itself today, but still generates a significant surplus and will continue to do so for the next 30 years with nothing whatsoever changed about its plan savings today. While we do need some tweaks to shore up Social Security in the long haul, Social Security is far from about to “collapse” as many politicians would like you to believe.

  5. Seniorinfo4u

    The Social Security Trust Fund has over $2 trillion in reserves. The primary area of concern is Medicare, which, because of the addition of 10,000 boomers each and every day for the next 19 years, will become increasingly problematic. 50% of all seniors in nursing homes are on Medicaid. There is a solution – raising the Medicare insurance premium.

  6. Adriana A.

    I also end up paying more toward SS than to Fed. it really sucks. ESPECIALLY when SS won’t be around when my generation retires.

  7. Nobailout4me

    A few tweaks is all SS needs. Wow, I am so relieved. The IRS is threatening my property over the only tax due from 10 and 11~SS tax. I guess it’s better for the common good to give it up so I can move into subsidized housing, and close my business.

Add a comment

*

Name: Your best email address: 5 subscribers No spamming ever. Unsubscribe at any time. Email Marketingby GetResponse