At least you can be certain that Social Security taxes won’t be going up in 2011. Because a cost-of-living adjustment (COLA) for Social Security benefits isn’t going to happen for next year, the ceiling for the 12.4% Social Security tax will remain at $106,800 of wages and/or self-employment income for 2011—the same as it was in 2009 and 2010.
The Social Security tax freeze for 2009-2011 follows 33 consecutive years of increases after COLAs were introduced in 1975. The 2.9% Medicare tax still applies to wages and/or self-employment income up to infinity. (For employees, half of both the 12.4% Social Security tax and the 2.9% Medicare tax is withheld from wages, and the employer directly pays the other half; self-employed individuals pay the entire amount of tax as part of the self-employment tax.)
On the downside: No COLA also means that retirees won’t benefit from any boost in Social Security retirement benefits in 2011.