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5 Lessons From The Obamas' Tax Return

Barack and Michelle Obama just released their joint tax return (see image below), showing $5.6 million in income and $1.8 million in taxes. In addition, there was that $1.4 million in Nobel Prize money not included on the form because President Obama turned it entirely over to charity.
President Barack Obama

The Obamas set a good example in many ways. Besides being generous (they also had $329,100 in additional charitable gifts), they paid more than $139,000 in Social Security and Medicare taxes (so Tea Partiers can't say they didn't pay their share), and put $49,000 into retirement plans (just in case their post-White House speaking and writing careers don't pan out.)

But they didn't get everything exactly right. Here are five good and bad lessons to learn from the Obama tax return.

  • Target your charitable giving. The Obamas gave to a total of 50 organizations, everything from Book Worm Angels (a Chicago literacy program) to the Central Asia Institute. Yikes! Of course, as a politician and president of all of the people, Barack Obama has an incentive to spread his gifts far and wide. More to the point, he has someone to open his mail for him. If you or I gave away money to 50 different groups, we'd be buried in renewal notices and new solicitations, and never again able to eat a dinner uninterrupted by phone calls. For the rest of us, it makes more sense to carefully choose a handful of groups we particularly care about -- one disease, one alma mater, one church, and one special issue -- and focus. It makes even more sense to give locally, as the Obamas did in their old Chicago neighborhood.
  • A side business is nice. Their return shows a mere $374,000 in salaries, and $5.1 million in business income, mostly from book royalties. Your business might be smaller -- say, an eBay-selling project or consulting gig. But it opens the door to deductions and savings (not to mention income) that you wouldn't otherwise have.
  • No deduction is too small to capture. Barack Obama wrote off $866 in office expenses against his business income. And $279 that he had to return in overpaid royalties. So... save every receipt!
  • Max out your retirement savings. Getting a tax break for stashing money is a good thing, even if you already have a pension coming to you and bright prospects for a second post-retirement career. The First Couple put $49,000 into their personal retirement plans.
  • Buy Treasuries? Or not. The Obamas declared $17,763 in U.S. government interest. They are helping to carry that debt, and keeping their money safe. Then again, they can afford the miniscule yields.
More on MoneyWatch: Retirement Plans for the Self-Employed
Parents: 3 Family Tax Deductions You Shouldn't Miss
How to Spend Your Tax Refund
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