Obama’s Pay Cut (Tax Break)

Photograph by Daniel Acker/Bloomberg

A copy of the U.S. Department of the Treasury Internal Revenue Service 1040 Individual Income Tax form for the 2011 tax year belonging to President Barack Obama and his wife, first lady Michelle Obama.

Talk about a circular transaction.

President Barack Obama could be able to claim a tax break for his decision to return 5 percent of his salary to the government.

Obama is giving back part of his $400,000 in salary in solidarity with federal workers facing furloughs because of budget cuts in the sequestration of federal funds.

Voluntary payments to reduce the public debt can be taken as deductions for charitable contributions, according to the Congressional Research Service.

At the 39.6 percent top federal tax rate — the one Obama insisted on last year — the $20,000 deduction for this returned pay would put $7,920 in tax relief back in his pocket.

If this happens, the government would pay Obama, who would pay the government, which would then pay Obama.

The White House didn’t responded immediately to a question about whether the president would claim the break on his 2013 tax return, which won’t be filed until early 2014.

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