On February 22, President Obama signed into law the “Middle Class Tax Relief and Job Creation Act of 2012.” The Act extends the 2 percentage-point payroll tax cut through the end of 2012, and also repeals a number of estimated tax shifts for large corporations. See below for the highlights of the tax changes in this new law.
The Act provides that the “payroll tax holiday period” means calendar years 2011 and 2012. Thus, the 2-percentage point payroll tax reduction and the 2-percentage point reduction in the OASDI tax under the SECA tax for the self-employed will apply through Dec. 31, 2012.
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.