Posted on 04/18/2010 7:43:01 AM PDT by OldBlondBabe
Maybe he filled Air Force One up with books and distributed them during his world victory tour last year.
Or maybe Soros paid for an autographed copy with one $5m check.
“Royalties from writing books go on Schedule C. And they are subject to self-employment tax.”
They MAY go on this schedule, or must? Unless Obama wrote off heaps of illegitimate expenses associated with generating these royalties, it seems to me that because of the SE tax, he ended up paying more in taxes than if he’d declared the identical royalty income and offsetting expenses on Schedule E.
But given the nature of the royalties, I can’t tell whether Obama made a choice that benefited Uncle Sam at his own expense or whether he had no choice in the matter. Given his historical pattern of charitable giving, the first possibility doesn’t seem that likely IMHO.
obama was not a constitutional law professor, although he did teach,
and john kennedy did not write profiles in courage. ted sorenson wrote
it. just a few quibbles.
Yeah, but these same “accountants” also deducted contributions to the “Congressional Black Caucus” on prior returns as charitable contributions too . . so it does make me wonder
Royalties from writing book must go on Schedule C and not on Schedule E. Royalties from land used to produce minerals such as oil and gas go on Schedule E.
I have researched this issue because I have written books on which I received royalties (such as Tax Strategies for the Self-Employed which is published by CCH Incorporated). At his salary level, he maxed out on Social Security tax. Therefore, the only self-employment tax he would pay is the Medicare tax, which has a nominal rate of 2.9 percent. He gets to deduct half of his self-employment tax in calculating his adjusted gross income.
“Tax Strategies for the Self-Employed”
Cool. I’m willing to accept you as an authority on this. :-)
I didn’t see the exact amount of royalty income, but say it was $4M. 1.45% of that is a hefty (from where I sit) $58K. I will reiterate my contention that it’s hard to picture Obama generously handing over that amount voluntarily (notwithstanding his repeatedly expressed desire to raise taxes on “the rich”). Thank you for confirming my suspicion he had no choice in the matter.
Some years ago I owned stock in an oil and gas limited partnership and IIRC I received a tax notice with instructions to put the income on Schedule E. I think Schedule E is probably for passive royalties that you get from things like owning rights to oil and gas, land, etc.
Authors get royalties in lieu of a salary for their active labor. That is why I suspect the IRS deemed it the equivalent of self-employed income.
And no AMT paid.
Obama: “Look at me I’m self-employed, I like to work at nothing all day.”
Does Campbell have a strategies page that is not on facebook?
There is no ceiling on the Medicare portion (2.9%) of the self-employment tax. There is an annual ceiling on the Social Security part of the self-employment tax (12.4%). The annual ceiling usually changes every year. You can find the current amount at http://www.ssa.gov. Good tax software programs do the calculations automatically.
I do not have a tax strategies group except on Facebook. At some point in the future, I may develop a membership Web site for providing more detailed tax advice. It would require a monthly fee.
The self-employment tax is calculated by taking the Schedule C (and any Schedule F (for farm income) net income and multiplying the total by 92.35%. The Social Security (12.4%) tax part is subject to an annual ceiling. FICA wages are included in determining the ceiling. The Medicare portion is 2.9% and not 1.45%. A taxpayer receives a deduction for half the tax. A deduction saves the taxpayer at most about 35 cents per dollar of deduction. So, if someone had $100,000 of self-employment income that is subject to the Medicare portion only because of the taxpayer’s high salary, the tax would be calculated as follows:
$100,000
x 92.35%
$92,350
x 2.9%
$2,678.15
Good tax software programs do all of these calculations automatically.
The taxpayer would receive a deduction of $1,339.08. If the taxpayer were in the 35 percent marginal income tax bracket, the deduction would save him $468.68 ($1,339.08 x 35%). The net tax effect would be $2,209.47 ($2,678.15 - $468.68) which is an effective self-employment tax rate of 2.20947 ($2,209.47 / $100,000) percent.
Exactly
Interesting. He had a large capital loss, but he got hit with the $3,000 limit of Sec. 1211. So, he has a large capital loss carryover.
“n effective self-employment tax rate of 2.20947”
Yep. I wasn’t thinking clearly: I knew the Medicare portion was 2.9% but was erroneously viewing the deduction as the equivalent of a tax credit rather than a deduction. Thanks for straightening me out.
So glad to hear our high-earning President is helping to contribute his “fair share” to the running of Leviathan... :-)
“Authors get royalties in lieu of a salary for their active labor.”
Of course, in a perfect world, Bill Ayers would have gotten a cut of the royalties reflecting his active labor in bringing “Dreams of My Fathers” into fruition. Obama’s so eager to use the tax code to shape behavior: perhaps he ought to have the tax code rewritten to penalize authors who free-ride on the unacknowledged help of ghost-writers.
Sheesh no surprise there.
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