On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law.
Who comes up with these names? How about something like the Cut My Taxes or Else Act of 2010?
I digress. The biggest headline is that our Social Security tax withholdings are being cut from 6.2% to 4.2% in 2011. All employees will immediately benefit from this 2% "bonus" beginning with their first paycheck in 2011. Employers will continue paying their full 6.2% share of Social Security taxes in 2011.
So basically if you make $50,000 next year, you will retain an additional 2%, or $1,000, in your pocket. The Social Security wage limit next year is $106,800, so if you make this much or more, your benefit will be $2,136. Care to share some of that bonus? Share it with us here at Conejo Valley Guide!!
The 2% tax reduction also applies to self employed individuals, who will temporarily pay a 10.4% self employment tax next year instead of 12.4%.
The cost of this temporary tax cut is $111 billion.
So why did they include "Job Creation" in the title of this law?? Because they are going to continue allowing businesses to write-off "bonus" depreciation on large capital purchases like equipment, furniture, fixtures, etc. That's nice and all for businesses to save on taxes but I'm not so sure that's gonna directly translate into new jobs. What they need substantial tax credit to directly compensate companies for hiring, retaining and not laying off employees, not accelerated depreciation. Just sayin.