Last month, President Obama released his 2010 tax returns to the public. You can download a complete copy of his federal and state tax returns at

Here is what I observed upon reviewing his returns:

  • Obama reported gross income of just under $1.8 million. While $400k came from his salary as President, the bulk of the remaining income came from his book royalties. (Page 1 of the pdf)
  • The President appears to be just as concerned about minimizing his tax burden and saving for his retirement as most taxpayers. Take a look at his Form 1040, Line 28, and you’ll see that he contributed the maximum of $49k into a “defined-contribution” self-employed retirement plan based on his net royalty income. (Page 1)
  • The total tax liability reflected on this tax return is $453,770 – or just over 25% of his gross income of $1,795,614. This might seem low, but as you’ll see in the next bullet, he claimed substantial itemized deductions, including donations to charities. He also saved taxes by taking a $22k credit for Foreign Taxes paid in connection with his book royalties. Without these two tax breaks, his total federal tax liability would have been approximately $560k, or 31% of his gross income. (Page 2)
  • The Obamas claimed itemized deductions of $373k on their Schedule A, including $245k in charitable donations, $50k in mortgage interest, $26k in real estate taxes, and $52k in state income taxes. Please note that the mortgage interest deduction is limited to interest paid on the first $1.1 million of mortgage debt. By claiming $50k of interest, it appears the Obamas did not overstate their allowable mortgage interest deduction. (Page 6)
  • The tax return includes a schedule of each donation made during 2010. While donating $245k is very generous, I find it interesting that he did not make a donation towards the US Debt (as we wrote about in our March 2011 newsletter.) Or, perhaps he did make a donation towards the debt but decided not to deduct that payment. (Page 37)
  • For his royalty income reported on his Schedule C, Obama was very conservative with the business expenses he claimed against that income. His expenses were limited to $184.5k for commissions and fees (presumably paid to his agent) and less than $1k for office expenses. Apparently, he decided not to claim any other expenses, including the home office or automobile mileage, that many self-employed individuals claim on their Schedule C each year. (Page 9)
  • The President has a sizeable capital loss carryover reported on his Schedule D. Take a look at line 14 of his Schedule D and you’ll see that he went into 2010 with a capital loss carryover of $122.5k. There were no additional stock trades reported for 2010, so he was able to use $3k of this capital loss carryover to offset his wages and royalty income. His returns don’t indicate when or how these losses arose, but it appears he made the right choice when deciding not to become a stockbroker or an investment manager. (Page 10)
  • Finally, the Obamas were NOT hit by the Alternative Minimum Tax last year. As we wrote in our October 2010 newsletter, married couples who earn substantial income are less likely to pay this secondary tax than couples who earn between $150k and $650k. Depending on his 2011 book royalties, he might find himself paying the AMT this year. Take a look at Vice President Biden’s tax return, and you’ll see that he paid $7,669 of Alt Min.

The Moral of This Story

So what did we learn by reviewing President Obama’s tax returns? He made a lot of money and paid a decent amount of taxes. Frankly, besides claiming $245k in charitable donations and earning $1.8 million in royalty income, the Obamas’ 2010 Form 1040 is pretty standard stuff.