Temporary Decrease in Employee's Share of Payroll Tax

In 2011, social security tax is withheld from an employee's wages at the rate of 4.2% (down from 6.2%) up to the social security wage limit of $106,800. There is no change to Medicare withholding.

The same reduction applies to net earnings from self-employment—the temporary rate is 10.4% (down from 12.4%) up to the social security wage limit of $106,800. The method of figuring one-half of self-employment tax for adjusted gross income changed slightly. A worksheet was developed to compute the deduction.