On Wednesday, President Barack Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which extends the reduced 4.2% Social Security tax rate through the end of the year.
Background
The employee portion of the Social Security tax was reduced from 6.2% of the first $106,800 of wages to 4.2% for 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The employer portion remains at 6.2%. Under the Temporary Payroll Tax Cut Continuation Act of 2011, enacted Dec. 23, 2011, the 4.2% rate was extended through Feb. 29, 2012. For 2012, that rate applies to the first $110,100 of wages.
The Act also extends certain unemployment benefits and blocks a cut in Medicare payments to doctors. Lawmakers agreed not to require the $93.2 billion estimated cost for the payroll tax cut extension to be offset by revenue-raising provisions.
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