A couple of days earlier, Mr. President filed his federal and state tax returns for 2013. Mr. President’s tax return remains exceptional in just how unexceptional it is; to be honest the majority of tax preparers would contentedly trade the return they are taking care of at this moment to deliver President Obama’s Form 1040.
Obama’s self-employment earnings from his book sales dropped down in 2012 from $258.722 to $104,000 in last year. Though, he did have stiff competition with Morrissey’s “Autobiography”. His tax was 20.4% almost consistent to what he paid 18.4% in 2012.
Because the reason Obama’s book revenue was decreasing, he donated $90,000 to an organization that works to help military families. There has been a direct link between his donation and book revenue, so the decrease in both doesn’t come as a surprise.
Repeatedly, Obama shows no interest to put money into the stock market, making a massive $3 of dividend earnings. Things are not way more intense in the bond industry, where he gained $6,575 of interest earnings. It makes you surprise where Obama has parked his dollars.
Now, let’s get through the good things. As you may realize, 2013 was a critical year in tax approach. Starting on January 1st, a number of tax raises suggested and signed into law by President Barack Obama, for example: (Source: Forbes)
1. Maximum average income rate is 39.6%. The rate applies on income $450,000 for married filing jointly and for single $400,000.
2. Maximum rate on long-term capital gains and dividends of 20% on $450,000/$400,000 income.
3. Resuscitated limit on itemized deductions with gross income of $300,000 for married and $250,000 for single lose 3% of most itemized deductions (maxing out at 80% of itemized deductions) for each dollar adjusted gross income surpasses the threshold.
4. Personal exemptions are eliminated once gross income surpasses the $300,000/$250,000 thresholds. Once the married taxpayer has adjusted gross income of $400,000, the exemptions are moved out.
5. A new payroll tax was implemented in 2013, the earned income from self-employment and wages in excess of $250,000 for married and filing jointly and $200,000 for single, will pay an extra 0.9% Medicare tax on the excess earnings.
6. Finally, taxpayers with gross income in excess of $250,000 for married and filing jointly and $200,000 for single, will pay an extra 3.8% surtax on net investment income, which includes items such as rents, capital gains, royalties, dividends and interest.
How Did The President’s Law Modifications Affect Him?
Considering that his taxable earnings came in at $333,329 – effectively below the $450,000 point from where the new 39.6% tax rate takes over – he continued to be depending upon the same 33% marginal rate he compensated in last year. At his point of taxable earnings, the larger tax rate on long-term capital increases and certified dividends – of which the President had none – isn’t applicable.
The President did notice the sting of the limitation on itemized tax deductions, however. Considering that his adjusted gross earnings were $481,098 – well greater than the $300,000 threshold – he dropped $5,433 of his $153,000 of itemized tax deductions (3%* ($481,098-$300,000)). This legislation modification would end up not affecting his total tax liability, however, simply because as in previous years, the President was depending upon the alternative nominal tax, where this new itemized tax deduction reduction is allowed.
With income of $395,000 and self-employment earnings of $100,000, Obama was also subjected to the new 0.9% pay-roll tax. More specifically, he paid an additional 0.9% on his earnings of $495,000 less the $250,000 threshold, or $245,000, amounting to $2,174 in additional tax liability.
Finally, the President was subjected to the new 3.8% tax on net investment earnings, but simply hardly. With just $6,575 in interest earnings, the President’s return is nearly totally bereft of net investment earnings. The President is in a position to balance out this sum in calculating his subjection to the 3.8% surtax by his $3,000 capital loss carryforward, even so, limiting his subjection to $3,575 * 3.8%, or $136.
Probably the most outstanding feature of the President’s tax return is the reason that the Form 8960 accurately calculated his subjection to the 3.8% surtax. Even though the final polices under Section 1411 enable a taxpayer to scale back other types of net investment earnings by the net capital loss of $3,000 allowed by Section 1211.
Consequently, the President identified himself somewhat within the alternative minimum tax sweet spot again, having to pay $9,513 in alternative minimum tax. One fascinating note for tax experts: in the event you consider the President’s taxable earnings in 2012 and 2013, you will find it somewhat similar: $333,000 in both instances. Regardless of this fact, President Barack Obama had a tax liability of $108,000 in 2012 when compared with $95,000 in 2013. Therefore, his tax liability moved down on the exact same sum of taxable earnings, despite the fact he was subject to a number of new taxes and phase outs.
The alternative minimum tax is capricious. In 2012, President Barack Obama’s $333,000 tax liability was after personal exemptions. These exemptions, which calculated to $15,200 in 2012, are not permitted in calculating alternative minimum tax. In 2013, because the exemptions were phased out under the new law described above, was not subject to an addback in calculating alternative minimum tax.
Additionally, the President Barack Obama paid more in state tax in 2012 as compared to what he did in 2012. State taxes are not allowed in calculating alternative minimum tax; which means the addition to regular income in calculating alternative minimum tax income was higher in 2012 as compared to 2013. Even though President Barack Obama’s taxable income was similar from 2012 to 2013, his alternative minimum tax income was $413,000 in 2012 compared to $379,000 in 2013, and his resulting alternative minimum tax liability $108,000 in 2012 compared to only $95,000 in 2013.