President Joe Biden and Vice President Kamala Harris have released their tax returns, and there are a few things to know for the average American.
The president and first lady paid federal income tax at a 24.6% effective tax rate.
The Vice President and her husband spent over $500,000 in federal taxes.
The returns were similar to 2020 and put them in the top 1% of filers. According to the Tax Foundation, the average American paid 13.3% in 2019.
Personal finance education laws are poised to be passed in these states, as well as changes to health savings accounts rules.
Eric Pierre, an Austin, Texas-based certified public accountant, owner of Pierre Accounting and co- host of the CPA Huddle podcast, said that they are both overpaying.
Harris earned more than $450,000 in gross earnings as a writer in 2021, but didn't save on payroll taxes by structuring her business as an S-corporation.
After paying reasonable compensation, owners can take distributions without Social Security and Medicare taxes.
He said that she will probably make more than her husband when she isn't in office.
Pierre said there may be missed opportunities for Emhoff, who received nearly $600,000 in partnership income.
The Bidens reduced their self-employment tax bill by receiving some wages through their company, which provided significant savings for the couple's book deals and speaking engagements.
The founder and CEO of Unlimited Financial Services in New Jersey said that they could further reduce their bill by padding retirement savings with contributions to a solo 401(k) or individual retirement account.
Pierre said that both returns show modest tax reduction strategies compared to private citizens.
The president has a $50,000 annual expense account, as well as housing, transportation and more. He explained that these benefits may be taxable compensation in the corporate world.
It seems like they’re conservative in the way they do their taxes.
Muhammad said that it seems like they are conservative in their taxes.
He pointed out that the Bidens have significant withholdings from their W-2 earnings in lieu of estimated tax payments for their self-employment income.
Muhammad said it was a set-it-and-forget-it approach.
Pierre said that both couples may consider estate tax planning strategies, particularly with provisions from the Tax Cuts and Jobs Act scheduled to sunset in 2026. The current exemption for federal estate taxes is more than $12 million per person, but will go back to $6 million in 2022.
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