Although the tax package was passed by Congress on New Year’s Day to protect most Americans from income tax increases, a majority of Americans will still end up paying more federal taxes in 2013. In general, the package passed this past Tuesday extends most of the Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000. What it didn’t do was to extend a 2 percent social security tax reduction that was in place for 2011 and 2012. In 2012, the 2
percent cut in the payroll tax was worth $1,000 to a worker making $50,000 a year.
With the expiration of the temporary 2 percent payroll tax cut on December 31, the employee share of the Social Security tax will increase from 4.2 percent to 6.2 percent. Social Security is financed by a 12.4 percent tax on wages up to $113,700, with employers paying half and workers paying the other half. 01.03.2013