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The 2011 Stimulus Check: 2% Payroll Tax Holiday

When Congress passed an extension on the Bush tax cuts [3], it also passed a new one year tax “holiday” on your payroll taxes. I’m calling it the 2011 version of an old friend to many Americans, the stimulus check [4]. Back in 2008, after the passage of the 2008 stimulus package, many Americans received $300 in the form of a stimulus check. In years since, that stimulus check has been morphed into the Making Work Pay credit [5] (resulting in $400 per person).

For 2011, the stimulus check has returned and this time it’ll be called a payroll tax holiday with a benefit of up to $2,136 per person.

Payroll Tax Holiday

Right now, employees pay a payroll tax, also called FICA tax, of 7.65% on their first $106,800 of income. 6.2% goes towards Social Security (OASDI) and 1.45% goes towards Medicare. After their first $106,800, you only pay the 1.45% of Medicare (there is no limit) and not the 6.2% towards Social Security. For 2011, the percentage you need to pay towards Social Security, as an employee, will be reduced by 2%. For someone earning the maximum $106,800, it’s a reduction of $2,136. After you take out taxes, based on your tax bracket [6], the rest goes into your pocket.

The first stimulus check gave you $300, the next one gave you up to $400, and this one has the potential of putting over two thousand dollars into your pocket over the course of the year (minus taxes).

(Photo: Tracy O [7])