President Joe Biden and Vice President Kamala Harris after Biden signs HR 55, the “Emmett Till Anti-Lynching Act,” in Washington on March 29, 2022.
Samuel Corum | Mayor Bloomberg | fake images
President Joe Biden and Vice President Kamala Harris have released their 2021 tax returnsAnd there are some key points for the average American, experts say.
President and First Lady Jill Biden reported a joint adjusted gross income of $610,702, paying $150,439 in federal income taxes at an effective tax rate of 24.6%.
Vice President Kamala Harris and her husband, Douglas Emhoff, He showed approximately $1.7 million in earnings, spending $523,371 in federal taxes at a 31.6% tax rate.
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“They’re both overpaying, particularly Kamala and her husband,” said Eric Pierre, an Austin, Texas-based certified public accountant, owner of Pierre Accounting and co-host of the CPA Huddle podcast.
For example, Harris earned more than $450,000 in gross earnings as a writer in 2021 and missed out on saving on payroll taxes by structuring her business as an S corporation.
After paying shareholder employees reasonable compensationowners can also receive distributions without the combined 15.3% Social Security and Medicare taxes.
“You’ll probably make a lot more than your husband when he’s not in office,” she said, adding that an S corporation can provide significant savings down the road.
There may also be missed opportunities for Emhoff, who received nearly $600,000 in partnership income in 2021, Pierre said.
The Bidens reduced their self-employment tax bill by receiving some wages through their business structured as an S corporation, providing significant savings for the couple. book deals and conference concerts in 2017 and 2018.
They could further lower their bill by increasing retirement savings with contributions to a Solo 401(k) or SEP individual retirement account, said certified financial planner Sharif Muhammad, founder and CEO of Unlimited Financial Services in Somerset, New Jersey.
Overall, both returns show modest tax reduction strategies compared to private citizens with similar incomes, Pierre said.
“It seems they are conservative in the way they do their taxes,” Muhammad said.
Additionally, the Bidens have significant withholdings on their W-2 earnings instead of estimated tax payments for his self-employment income, he noted.
“It’s kind of a ‘set it and forget it’ approach,” Muhammad said.
Both couples may also consider estate tax planning strategies, particularly with the provisions of the Tax Cuts and Jobs Act. scheduled for sunset in 2026Peter said. While the current federal estate tax exemption is more than $12 million per person by 2022, it will revert to an estimated $6 million.