How Will Proposed Tax Cut Deal Affect Your Paycheck?

CHICAGO (CBS) - It's a deal that would put a lot of money back in your paycheck; $800 more, if you earn $40,000 a year. And $1,400 more if you earn $70,000 a year. That doesn't even include the income tax breaks and unemployment benefits. But it's not a done deal yet.

President Barack Obama is trying to convince his fellow Democrats to go along with the tax cut compromise he reached with Republicans.

CBS 2's Dorothy Tucker reports on how the tax cuts will affect you and your wallet.

The president said it best: "If we do nothing, then on January 1st, the average family is going to see their taxes go up about $3,000."

If Congress extends the tax breaks, the average American will see their taxes go down.

How will you know you're getting this tax break? There's a line item in your paycheck that says FICA.

Jill Schlesinger is the editor at large of CBS Moneywatch.com. She explains that FICA is the taxes your employer deducts from your check to cover social security.

"That number should shrink by a bunch because it's going from 6.2 percent to 4.2 percent," said Schlesinger.

For example, on a weekly check this year, the FICA amount is $92. So on the same check next year, that $92 will be down to about $62; a savings of $30 every week.

"I think it's a good thing if we're able to keep more money in our pockets," said taxpayer Carol Gothard.

From the working class to the middle class, to the wealthy, this proposal is good news for everyone because your income tax rate won't go up.

A family making $100,000 a year has a tax rate of 25 percent, or $25,000. Without the extension, that rate would have increased to 28 percent, or $28,000. So with the extension, you get to keep that $3,000.

The rich will get richer with this proposal, because the tax on investments like stocks and bonds is frozen at 15 percent. It would have increased to 20 percent.

A couple of the other tax breaks that will continue with the extension are the college tax credit and the child tax credit. The average family gets about $1,700 for the college tax credit.

The child tax credit was going to be cut in half, but with the extension, you'll still get $1,000 for every child.