April 19 (Bloomberg) -- President Barack Obama and his wife, Michelle, reported $1.7 million in adjusted gross income last year and paid $453,770 in federal income taxes, according to tax returns released yesterday by the White House.
The Obamas’ adjusted gross income for 2010 dropped about 69 percent from the previous year, when it was $5.5 million, and 2010 was the couple’s lowest-earning year since 2006, before Obama’s presidential campaign generated interest in books he wrote. Their total federal income tax liability for 2010 dropped about 75 percent from 2009, when it was $1.8 million.
During a town hall-style meeting today, President Obama described looking at his tax form, which he signed April 17.
“There is a moment there where you look at the figure you’re paying and you say, ‘Wow, I don’t -- let me think about my position on taxing the wealthy here,’” he said in Annandale, Virginia. “Nobody volunteers and says, ‘Boy, I’m just wild to pay more taxes.’ But it’s a matter of values and what we prioritize. And I certainly don’t think my taxes should be even lower.”
A debt-reduction plan Obama released last week calls for letting taxes rise on the wealthiest Americans when lower tax rates enacted under former President George W. Bush expire at the end of 2012. “We are going to have to ask everybody to sacrifice,” Obama said today. “We can’t just tell the wealthiest among us, you don’t have to do a thing.”
A White House blog post from press secretary Jay Carney said “the vast majority of the family’s income is the proceeds from the sale of the president’s books.” In November 2010, Obama released “Of Thee I Sing: A Letter to My Daughters,” a children’s book. He is also the author of a memoir, “Dreams from My Father,” and “The Audacity of Hope,” which outlines his political philosophy.
The Obamas reported $1.3 million in taxable income after deductions. Obama earned his $400,000 presidential salary plus almost $1.4 million in income associated with his books.
The Obamas paid the top marginal tax rate of 35 percent on most of their income, and they would pay more if Congress passes the president’s tax policies. Obama supports allowing the top rate to return to 39.6 percent in 2013, when lower rates enacted in 2001 and 2003 are set to expire. Last week, he announced his support for curbing deductions by high earners among ways to raise an additional $1 trillion of tax revenue over the next 12 years.
In 2010, Obamas donated $245,075 to charities, or 14.2 percent of their adjusted gross income. That’s less than the $329,100 they gave in 2009, when charitable contributions made up 6 percent of their income. In 2009, the Obamas also donated the entire $1.4 million that the president received for winning the Nobel Peace Prize, which wasn’t counted as taxable income because it was transferred directly to charities.
The largest single donation of $131,075 in 2010 went to Fisher House Foundation Inc., which provides lodging for military families near large military hospitals and hospitals run by the Department of Veterans Affairs. The president is donating proceeds from Obama’s children’s book to a Fisher House scholarship fund for children of military personnel who were killed or became disabled through active military service.
The next-largest contribution, $15,000, went to the Clinton Bush Haiti Fund. Other recipients of the Obamas’ donations included the Boys & Girls Clubs of America, which got $10,000; the United Negro College Fund, which got $5,000; and the University of Hawaii Foundation, which got $2,000.
In addition to the charitable contributions, the Obamas claimed itemized deductions of $78,269 for state and local taxes and $49,945 for home mortgage interest. They owed the state of Illinois $51,568.
The Obamas made estimated tax payments during the year and will receive a federal tax refund of $12,334 and a state tax refund of $959.
Obama is using many common tax-planning techniques, including retirement accounts and timing of state tax payments, to minimize alternative minimum tax liability, said Alan Dlugash, a tax partner at the accounting firm Marks, Paneth & Shron LLP in New York.
Dlugash said that given current low interest rates, he would advise clients with the Obamas’ apparent cash resources to pay off their mortgages as a way of getting a higher rate of return.
“I’ve advised most of my clients to pay it down, but he’s still keeping his own mortgage and seems to be paying it down in the normal way,” Dlugash said.
Vice President Joe Biden and his wife, Jill, reported adjusted gross income of $379,178 and paid $86,626 of federal income taxes. They owed $7,180 of that amount with the return. The Bidens paid $7,669 under the alternative minimum tax, the parallel tax system that was originally designed to prevent high-income taxpayers from using legal deductions to avoid all income taxes.
The Bidens contributed $5,350 to charity. Their largest cash contribution of $1,400 went to the Northern Virginia Community College Alumni Scholarship Fund. Jill Biden teaches at the school, which paid her $82,488 last year, according to the tax return.
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