Social Security tax reduced; more for your paycheck

The Bush era tax cuts that Congress recently agreed to, will result in a 2 percent increase in your paycheck this year.

U.S. employees will be paying 2 percent less in Social Security taxes this year which means a bigger paycheck. Normally, employees pay 6.2 percent of their gross compensation to the Social Security portion of FICA taxes, only the first $106,800 of your earned income is subjected to this tax. In 2011, that number will fall to 4.2 percent, resulting in the 2 percent reduction.

That means for those making, say an average of $50,000 a year, they'll see about $83 more a month, which ends up to be about $996 dollars extra for the year, its basically like a cost of living raise.

"To a small degree, most of that money will stay here locally to be disposed of by households as households typically dispose of their income rather than it being confiscated and sent off to Washington, " according to local economist, Karr Ingham with Happy State Bank.

And if you're up in the higher tax brackets there is a cap of $2,136 for those who make more than $106,000 a year.

To find out how to make the Payroll Tax Holiday work for you click here.

Kiplinger's has a calculator on its web site that can help you figure out how much of an increase you will see in your weekly/bi-weekly paycheck. Click here to check out the calculator. But be aware of the fact that the calculator only covers the 2011 tax cut. It doesn't account for the $400 maximum per person you may lose if you qualified in 2010 for all or part of the Making Work Pay tax credit.