As we approach an election year, I find it intriguing to analyze the tax returns of presidential candidates and provide a summary of their reported income in their most financially successful or recent tax year, as these documents are typically publicly available online. This exercise is meant to be non-political and aims to offer a professional tax preparer’s breakdown of a presidential tax return for your understanding.
Let’s begin by reviewing President Joe Biden’s 2017 federal tax return filing. In 2017, President Biden filed an amended 1040X because his accountants mistakenly counted a $3,000 charitable contribution to the Tragedy Assistance Program twice. This amended federal return was filed on July 7, 2019, and he had to pay an additional $1,666 in federal taxes on top of the $3,553,249 balance he already paid with his original 2017 federal tax return.
On President Biden’s 2017 tax return, he reported a total income of $11,037,751, which came from various sources, including:
Northern Virginia Community College (spouse): $90,132
The Controller Trustees of the University of Pennsylvania (taxpayer): $371,159
Celticcapri Corp (S-Corp, taxpayer): $145,833
Giacoppa Corp (S-Corp, spouse): $100,000
US State Senate (taxpayer): $12,963
Taxable Interest Income: $7,669
Massachusetts Mutual Life Insurance Co: $23, $13, and $37
PNC BANK: $218
United States Senate Federal Credit Union: $15
Manufacturers and Traders Trust Association: $6,945
New Castle County School Employees: $4
Celticcapri Corp (Schedule K-1): $414
Business Income: $862 (Jill Biden Author business income)
IRA distributions: $961 (Wells Fargo Clearing)
Pension & Annuities: $213,195 (Office of Pensions: $33,122, Office of Personnel Management: $180,073, with a $21,839 rollover that’s nontaxable)
Rental Real Estate, Royalties, Partnerships, S-Corporations, Trusts, etc. (Schedule E): $10,060,058
Rental Property in Wilmington, DE: $11,319
Celticcapri Corp (S-Corporation, taxpayer): $9,490,857
Giacoppa Corp (S-Corp, spouse): $557,882
Social Security Income: $34,919 (Taxable Social Security income – taxpayer: $16,576, spouse: $12,389)
The majority of President Biden’s 2017 income came from two S-Corporations, Celticcapri Corp (President Biden) and Giacoppa Corp (Jill Biden). These S-Corporations are related to public speaking engagements. S-Corporations offer favorable tax treatment compared to C-Corporations, as they are pass-through entities, which means they pass their profits directly to shareholders. Since S-Corporations are taxed as corporations and not LLCs, the income distributed from the corporation is considered dividend income and is not subject to self-employment tax, such as Social Security and Medicare tax. This allows taxpayers to categorize their income favorably, as shareholders of an S-Corporation only need to pay themselves a “reasonable salary” from the S-Corporation, with wages paid to themselves subject to Social Security and Medicare tax. While the remaining pass-through income from the S-corporation not categorized as wages are not subject to self-employment taxes.
President Biden and Jill Biden paid themselves wages of $145,833 and $100,000 from their respective S-Corporations, but they had net income of $9,490,857 and $557,882 from their S-Corp businesses. In 2017, Social Security tax was 6.2%, but it was only applied to the first $127,200 of wages, while Medicare tax was 1.45%, with no wage cap limit. Medicare tax instead increases by 0.9% once wages exceeded $200,000.
The Biden’s tax preparers saved them the following amounts by electing to have their businesses taxed as S-Corporations:
President Biden S-Corp (CelticCapri):
S-Corp Income: $9,490,857.00
Threshold for increased Medicare tax: $200,000.00
S-Corp wages: $145,833.00
(Medicare tax threshold less S-Corp wages paid) Subject to 1.45% Medicare tax: $54,167.00
Medicare tax savings: $785.42
(S-Corp net income less Medicare tax threshold) Subject to 2.35% Medicare tax: $9,290,857.00
Medicare tax savings: $218,335.14
President Biden Total Taxes saved by electing S-Corp Taxation: $219,120.56
Jill Biden S-Corp (Giacoppa):
S-Corp Income: $557,882.00
Wage base limit for Social Security tax: $127,200.00
S-Corp wages: $100,000.00
(2017 Social Security wage base less S-Corp wages paid) Subject to 6.2% Social Security income tax: $27,200.00
Social Security tax savings: $1,686.40
Threshold for increased Medicare tax: $200,000.00
(Medicare tax threshold less S-Corp wages paid) Subject to 1.45% Medicare tax: $100,000.00
Medicare tax savings: $1,450.00
Subject to 2.35% Medicare tax: $357,882.00
Medicare tax savings: $8,410.23
Jill Biden total tax savings: $11,546.63
The payroll tax strategy described above is entirely legal and is often known as the Edward/Gingrich tax loophole, named after Senator John Edwards and former House Speaker Newt Gingrich. Public officials have a history of employing this tax strategy, not only to achieve tax savings but also to maintain privacy by filing a separate tax return that is not mandated to be disclosed to the public.
After deducting $12 of self-employment tax and $6,430 of self-employed health insurance, their total Adjusted Gross Income in 2017 was $11,031,309. Their itemized deductions amounted to $1,774,195 but were limited to $1,452,670. These deductions were primarily from $736,613 in real estate taxes and state and local taxes paid. (Note that the Tax Cut and Jobs Act passed in 2018 limited the state and local tax deduction to a maximum of $10,000 per year.)
Additionally, President Biden claimed a mortgage interest deduction of $23,820 in 2017, with the largest itemized deduction coming from his charitable contributions made that year, totaling $1,013,762. Here’s a summary of his charitable contributions:
CATHOLIC DIOCESE OF WILMINGTON: $25,000
NORTHERN VIRGINIA COMMUNITY COLLEGE EDUCATION FOUNDATION, INC.: $11,200
JOSEPH ON THE BRANDYWINE: $25,000
UNITED SERVICE ORGANIZATIONS, INC.: $862
WESTMINSTER PRESBYTERIAN CHURCH: $1,600
WEST END NEIGHBORHOOD HOUSE, INC.: $50,000
MOTORCYCLE RELIEF PROJECT: $2,000
UNITED JEWISH FEDERATION OF CHICAGO: $180,000
DELAWARE BOOTS ON THE GROUND: $10,000
BOYS AND GIRLS CLUBS OF THE VIRGIN ISLANDS: $5,000
SANDY HOOK PROMISE FOUNDATION, INC.: $5,000
DELAWARE ASSOCIATION OF POLICE: $100
KINGSWOOD COMMUNITY CENTER, INC.: $160,000
DELAWARE CENTER FOR JUSTICE, INC.: $120,000
DELAWARE DIVISION OF PARKS AND RECREATION: $2,000
THE JOSEPH BIDEN FOUNDATION: $100,000
COMMUNITY LEGAL AID SOCIETY, INC.: $50,000
HUMAN RIGHTS CAMPAIGN FOUNDATION: $25,000
MISSION K9 RESCUE: $3,000
SAVE THE CHILDREN FOUNDATION, INC.: $15,000
CRANSTON HEIGHTS FIRE COMPANY NO 1: $15,000
DELAWARE TECHNICAL COMMUNITY COLLEGE EDUCATION FOUNDATION: $50,000
NANTUCKET DREAM FOUNDATION: $5,000
BEAU BIDEN FOUNDATION FOR THE PROTECTION OF CHILDREN: $150,000
TRAGEDY ASSISTANCE PROGRAM FOR SURVIVORS: $3,000
The total deductible charitable donations made in 2017 amounted to $1,013,762.
The total itemized deductions for 2017 reduced their total taxable income for the year to $9,578,639. Additionally, there were $23 for the employer portion of self-employment tax, $1,357 for household employment tax on $8,600 paid to a household employee, and $4,888 for additional Medicare tax and net investment income tax, resulting in a total federal income tax of $3,744,640 for the 2017 tax year.
President Biden had withholding of $191,391 from various sources throughout the 2017 tax year, as follows:
Northern Virginia Community College (spouse): $14,037.00
The Controller Trustees of the University of Pennsylvania (taxpayer): $95,923.00
Celticcapri Corp (S-Corp, taxpayer): $31,170.00
US State Senate (taxpayer): $3,847.00
PNC BANK: $60.00
Office of Pensions: $2,738.00
Office of Personnel Management: $21,539.00
Withholding Social Security Income: $7,344.00
Additional Medicare Withholding: $1,540.00
Excess Social Security tax withheld: $13,193.00
As a result, there was a federal tax due of $3,553,249 (Total Federal tax of $3,744,640 minus total federal withholding of $191,391) that President Biden had to pay with his completed 2017 tax return filing.
Thank you for reading, I hope you enjoyed this article. If you are interested in seeing more related articles and other presidential tax return breakdowns, please sign up to our email list or reach out to us at firstname.lastname@example.org.
All the best,
Christopher Badaracco, CFP®, MST, EA
Rose Wealth Advisors
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