Social Security increase 2013: Social Security tax increase causes paycheck cut, but how much?

Friday, January 11th was the first payday of 2013 for millions of people. Many of them braced themselves: It was a lot smaller.

And your boss is probably struggling to explain it to a few people.

How Much Extra You Will Pay?

When members of Congress worked out a deal to avert the fiscal cliff, they did not extend the reduction to the Social Security Tax. As of Jan. 1, that tax increased from 4.2 percent to 6.2 percent.

It is an increase you'll notice in your paycheck.

If your family earns $50,000 a year, you will see an extra $1,000 deducted this year.

That comes to an extra $40 a paycheck.

Business Owners Worry

But behind the scenes, these are very frustrating times for people who run small businesses.

Mike Luken has run his family's seafood market since 1977. But he has never entered a new year with such uncertainty, knowing that his eight employees will be looking at smaller paychecks.

"The payroll's not gonna change, they're going to be paid the same amount of money," Luken said. "But what's going to happen with taxes, and the extra $10 you had every week in your paycheck? Is that going to disappear?"

Pay Cut in January, a Second in February

Luken says that will be just the start for his employees.

No sooner will they get used to smaller paychecks in January then they may get another cut in February, when he has to readjust for rising health care premiums.

"We offer health insurance to some of our employees,but we have no idea where that's heading also. Except the rates, when we renew in February, are going to be higher," Luken said.

That, he says, will hurt everyone from him to his employees to his customers, which will mean less money coming in.

"If they lose $10 a week, over a year's time, what does that amount to?" Luken wondered. "Then going out to dinner once or twice, or vacation? Everyone's going to have to cut back a little bit."

The one thing that is certain is your January pay will probably be less than it was last year.

So budget accordingly, so you don't waste your money.

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