Republican Presidential candidate, Mitt Romney, has released his tax returns for 2010, showing a remarkably lower tax rate than the average American taxpayer. Mitt Romney earned about $21.6 million in income while paying $3 million in taxes. However, that only amounts to a 14% tax rate while the top 1% of U.S. earners paid on average a 24% tax rate. So how does Mitt Romney pay a significantly lower tax rate?
In short, he has capital gains. Capital gains are taxed at a top rate of 15% if the investment is held for more than a year. The reason the rate is low is to provide incentives for investors to make capital investments, pursue entrepreneurial activities, and account for the volatile corporate income tax. Romney’s other advantage is his impeccable tax preparation. With a 203 page long 1040 return, Romney has almost a full house of schedules and a plethora of other forms attached. In addition, the Romneys do not take off a mortgage-interest deduction or deductions for a home office, car or travel expenses.
Romney’s returns do not disclose the entire wealth of his family because he is not required to report any underlying wealth, investment returns or fees as a percentage of invested assets. However, it is important to understand the different tax codes the wealthy can utilize just as much as the poor can utilize their tax codes.
At JDKatz, P.C., we have a strong understanding of the the nations extensive tax codes and we can help identify deductions and exemptions
that are allowed when filing your returns. Do not hesitate to call us at 301-913-2948.