Money Advice for New Grads

What the Payroll Tax Cut Is Worth to You
February 2012

Use this simple calculator to see how much the extension of the two-percentage point cut in the Social Security payroll tax keeps in your pocket. This reduction in the payroll tax was first introduced as part of the compromise to extend the Bush-era tax cuts and was in place for all of 2011. Late last year, Congress agreed to extend it through the first two months of 2012. Now, a further extension covers the rest of 2012.

If you make less than $110,100, the benefit of the deduction is constant through the year. If you make more than $110,100, your paychecks will jump once you pass that threshold and the remaining 4.2% of the Social Security payroll tax disappears.

1. Enter your annual salary or self-employment income:

2. How much of it do you contribute to flexible spending accounts (?) The part of your salary contributed to flex plans to reimburse child care and medical expenses escapes the payroll tax as well as the income tax. Since it's not taxed in the first place, this part of your salary doesn't benefit from the 2 percentage point cut in the payroll tax. for child care and medical expenses?