Tax Cut Deal Agreed to

Categories: News, Taxes

The House plans to vote on a new version of the Senate-passed bill to extend the payroll tax cut that was set to expire January 1st. What this means immediately to your personal finances is that your net take home pay decrease remains at least for a couple more months, by not reverting to the 6.2% regular tax, but stays at the current 4.2% rate. If you earn $50,000, this means about $80 more per month in take home pay. This means more to you if you are self-employed, because your tax will remain temporarily at 8.4%, instead of 12.4%, if earning $50,000 you will continue to have about $160 more per month in net pay.

The Social Security Tax (also known as FICA Federal Insurance Contributions Act) is made up of Old Age, Survivors and Disability Insurance (OASDI) and Medicare. The FICA tax rate for employees is 7.65% (OASDI 6.2% {temp 4.2}, Medicare 1.45). For self-employed it is 15.3% (OASDI 12.4% {temp 8.4%}, Medicare 2.9%). The taxable wage base for OASDI is $110,100 for 2012, which means your income above this figure is not taxed OASDI, except for Medicare.