REDUCED SS WITHHOLDING RATE FOR 2011 ONLY

If you noticed an increase in your take-home pay this year, it is probably the result of a reduction in Social Security withholding.  But don’t get too accustomed to it; the reduced Social Security withholding is only temporary.

As part of a government economic stimulus measure, the employee’s share of Social Security payroll withholding is reduced to 4.2%, down 2% from the normal rate of 6.2%.  The reduction is for one year only (2011) and will return to the 6.2% in 2012.

For individuals receiving the maximum wage, this translates to a $2,136 (2% of $106,800) reduction in withholding during the year.  Self-employed individuals enjoy a similar benefit, but that too goes away after 2011.