President Joe Biden and Vice President Kamala Harris recently released their annual tax returns, providing valuable insights for average Americans, according to tax experts. The president and first lady reported a joint adjusted gross income of $619,976 for 2023, while the Vice President and her husband showed an adjusted gross income of $450,299, showcasing the different financial scenarios that can exist within political figures.
In 2023, both couples earned the majority of their income from salaries, with federal and state taxes withheld from employers. However, they also received interest income, which can lead to surprises at tax time if not properly managed. This underlines the importance of tracking taxable activities such as dividends or fund distributions in brokerage accounts to avoid unexpected tax penalties.
The Bidens have reduced self-employment taxes by receiving wages through S-corporations, enabling them to take distributions without incurring Social Security and Medicare taxes. While this strategy has provided significant savings for the couple, working-age taxpayers with self-employment income need to consider how lower wages could impact future Social Security benefits, as the calculation for benefits is based on up to 35 years of wages.
Typically, taxpayers receive refunds when they overpay taxes throughout the year, while they owe taxes if they underpay. Both couples showed a small estimated tax penalty due to underpayments from quarterly deadlines and interest. It is essential for individuals to ensure that their tax payments align closely with their liabilities to avoid unexpected bills or refunds at tax time.
When filing tax returns, it is crucial to maintain a balance between total taxes paid and owed. As noted by experts, being within a range of plus or minus $500 in terms of refunds or balance can be considered ideal. Both couples demonstrated a fairly close margin between total taxes paid and owed, emphasizing the importance of accurate tax planning and payments throughout the year.
The tax returns of President Biden and Vice President Harris offer valuable lessons for average Americans in terms of income sources, self-employment tax strategies, managing tax refunds, and balancing total tax liabilities. By analyzing and understanding the financial decisions and implications reflected in these tax returns, individuals can gain insights into effective tax planning and management strategies for their own personal finances.