On February 22, President Obama signed legislation that extends the 2% payroll tax holiday that was enacted by the 2010 Tax Relief Act that was set to expire on March 1, 2012.
The legislation, which is titled the “Middle Class Tax Relief and Job Creation Act of 2012,” extends the 2-percentage-point payroll tax cut through the end of 2012.
2% Payroll Tax Cut
As a result, for 2012, employees will pay only 4.2% Social Security tax on wages up to $110,100 (wage base for 2012) and self-employed individuals will pay only 10.4% Social Security self-employment taxes on self-employment income up to $110,100.
The maximum savings for 2012 will be $2,202 (2% of $110,100) per taxpayer. If both spouses earn at least as much as the wage base, the maximum savings will be $4,404.
Additionally, the act repeals the recapture provisions applying to taxpayers with wages exceeding $18,350 over the first two months of 2012.
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