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Saturday, April 6, 2013

Obama Won't Take Charitable Deduction for Contribution of $20,000 of His Salary to Feds

ObamaWall Street Journal:  Obama Won’t Deduct Returned Pay, by Laura Saunders:

President Barack Obama’s gesture of solidarity with furloughed federal workers will cost him about $8,000 out of pocket, according to tax specialists.

On Wednesday, the White House announced that the president plans to return 5%, or about $20,000, of his $400,000 salary this year to the Treasury in sympathy with federal workers facing reduced pay because of the automatic spending cuts known as the “sequester.” A White House aide said the president plans to write a check to the Treasury every month for a portion of his pay. He will write the first check this month. ...

In January, Congress raised the top tax rate on ordinary income to 39.6%, and a new payroll tax of 0.9% also took effect for high earners. The Obamas are expected to be subject to both, giving them a total tax rate of at least 40.5% on the $20,000 they donate, or about $8,100. ...

Of course, the president could treat the $20,000 as a charitable gift to Uncle Sam. Such contributions are typically deductible, according to IRS Publication 526. If he did, says [Jay] Starkman, “his net out-of-pocket would only be about $11,900.”

On Thursday a White House aide said the president will not take a charitable deduction for the $20,000.

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Comments

Of course, he can always just amend his return and take the charitable deduction.

Posted by: andy | Apr 6, 2013 3:41:54 PM

Rather than a phony gesture like this, it would be better if Obama returned five percent of the vacation travel costs for him and his family which are subsidized by taxpayers.

Posted by: Woody | Apr 7, 2013 8:05:42 AM

Last fall, didn't someone in the tax world, possibly on this blog, argue that Romney had broken the law by understating his deduction for charitable contributions?

Posted by: Jake | Apr 7, 2013 4:59:56 PM