Two-month extension will be funded by additional charges on mortgages issued by Fannie Mae and Freddie Mac
Congress passed the much-debated two-month extension of the payroll tax cut just before leaving town for the holiday. President Obama signed it into law shortly after.
The package is the same one passed by the Senate earlier this month and originally rejected by the House, with Republican leadership citing the desire to negotiate a full-year extension.
It extends the 2 percentage point cut in Social Security taxes paid by employees for two months (from 6.2 percent to 4.2 percent). The extension is paid for by charging an additional 0.1 percent in fees for banks that issue mortgages backed by Fannie Mae or Freddie Mac for 10 years.
On a $200,000 house, the new fees would cost the average homebuyer $17 a month, or more than $6,000 over the course of a 30-year loan, according to Congressional estimates. (Borrowers that take out larger loans would pay more.) It will also apply to refinanced mortgages.
The tax cut will save a taxpayer making $50,000 a year $165, according to the Associated Press.