Payroll Tax Relief and What it Means to YOU

By Judy Stewart, CFP®, MBA, EA
Carlsbad, CA
http://www.stewart-financial.com/

If you haven’t heard, President Obama signed a new tax bill last week. One of the items that will affect all employees is the 2% point reduction in an employee’s share of Social Security portion of the FICA Tax, from 6.2% to 4.2%. What exactly does that mean for you?

The table below illustrates the change and savings. FICA limits are currently adjusted for inflation and are currently set at $106,800. The tax savings is currently only available for 2011.

Pay               2010 Tax (6.2%)          2011 Tax (4.2%)    Savings
$30,000         $1,860                          $1,260                     $600

$50,000         $3,100                          $2,100                    $1,000

$80,000         $4,960                          $3,360                    $1,600

$100,000       $6,200                          $4,200                    $2,000

$106,800       $6,621                          $4,485                    $2,136

This is a huge opportunity for every employed person to increase their 401k contributions or contribute to an IRA or a Roth IRA in 2011. This is FREE money, folks. Using it for retirement is a very wise move.