Below is an example of the impact of the reduced Social Security tax at various annual salary levels:
Salary: $50,000
2% reduction of SS 1,000
Salary $75.000
2% reduction of SS 1,500
Employees will see their take-home pay raised by the Social Security reduction amounts. For employers, they will continue to pay the 6.2% on salaries paid. The law only effects the amount paid by an employee.
Payroll (tax-home pay) is not the only thing effected by this tax extension. Below are a few of the highlights of the new tax law:
- Tax rates extended to 12/31/12 (rates remain at current levels: 10%, 15%, 25%, 28%, 33%, & 35%)
- Qualified capital gains & dividends tax rates remain the same (currently 0% for those in the 10% & 15% income tax brackets with a maximum of 15% for those in higher income tax brackets)
- Itemized deductions limitation and personal exemption phasehout have been fully repealed for upper-income taxpayers
- Marriage penalty relief will be extended to 12/31/10
- Child credit (for those children under age 17) will remain at $1000 (was expected to be reduced to $500 if the law was not extended)
Businesses also receive benefits with the new law:
- 100% Bonus Depreciation for qualified property investments made after September 8th, 2010 and before January 1, 2012
- Increased the dollar amount for Section 179 expensing (direct write-off of purchases of equipment, etc.)
