Category: tax

The tax history project has compiled an archive of the presidential tax returns, in which we have the tax returns of Pence family from 2006 to 2015. By going through these returns, we can see his family financial situation, and the changes they had gone through these 10 years. All the information contained in this analysis comes from the tax returns except otherwise noted.

2006

In 2006, Michael R. Pence family filed a joint return with his wife Karen Pence claiming three children, the oldest Michael J, the middle daughter Charlotte, and youngest daughter Audrey. all under 17. They live in my neighborhood Arlington, VA. Mr. Pence was a member of congress (house of representative), and Mrs. Pence was a teacher.

Their combined wage was $161K. As revealed in later years, Mr. Pence earned about $150K and Mrs. Pence earned $10K and $30K depending how much she worked. Mrs. Pence had self employment taxable income of $400 (gross $1,215), which had been like this through out the years. Mr. Pence had a one time speaking fee of $1,000.

They owned a house. They paid property tax $6,172. Assuming the real estate tax rate was 1%, the value of their house was around $600K. They paid the mortgage interest $32,151. Assuming the mortgage interest is 5%, they has a debt of $640K. There wasn’t much equity in the house, or perhaps a little under water. They had a cash donation $11,986 this year, and it had been normally between $10K and $20K in good years, and less than $10K in bad years.

They managed to get $500 child credit out of the $3,000 maximum possible.

2007

The only thing that was worth noting was that they filed an amended return for the year 2007 to remove the $1,194 retirement distribution from taxable income because it had been rolled over within 60 days. The amended return generated a $430 additional refund. This amendment was not required to file, either the $430 was important to Pence family, or it was important to the accountant to get things right. It was revealed that the accountant charged $670 for tax return preparation for the prior year, which was a simple return.

2008 - 2011

Life went on went on eventlessly from the perspective of the tax returns, but challenges were under way as Michael J. turned 17 in 2008, Charlotte turned 17 in 2010, and Audrey turned 17 in 2011.

2012

The year 2012 saw a major change of Pence family. The address on the return was Indianapolis, Indiana, and the occupation of Mr. Pence was changed from legislator to governor, but I believe this was his address and occupation in 2013, as Mr. Pence still had W2 from house of representative, and Mrs. Pence from Immanuel Christian School in Springfield, VA. Their combined wage was $164K which was almost the same as in 2006.

I am not sure why both the property tax was $4,596 (vs $7,020 in 2011), the mortgage interest was $19,844 (vs $26,546 in 2011) were lower this year, as they sold the house next year.

Both Michael J. and Charlotte were in college, and both claimed Hope / American opportunity education credit. Michael J. went to Purdue University in Indiana, and Charlotte went to Depaul University in Illinois. As Michael J. (21) was two years older than Charlotte (19), I am not certain if Michael J. did not go to college directly, or did not claim the credit in prior years. The maximum education credit for two students were $5,000, due to their relatively high income, the credit was reduced to $3,130. Many of my clients could not get any credit at all.

2013

2013 was the year that Mr. Pence changed job because they had a excess social security tax refund of $287, which indicated he had more than one employer. (Cold knowledge: the social security tax has an upper limit, when one has two or more employers, combined they may withhold social security tax above the upper limit, and the excess will be refunded.)

The new job as governor pays less, the family income was reduced to $117K (vs $164K in prior year). In this year, the youngest daughter Audrey also went to college, Northeastern University in MA. Due to their decreased income, they got the full $7,500 education credit, maximum possible credit for three students.

They must have sold the house in VA because they were able to deduct mortgage points ($1,716), which represents the sum of 18.86 years’ amortized amount ($91) which they had deducted in prior years. From this we can infer that they took a 30-year loan in the end of 2001. Both of the property tax ($1,928) and mortgage interest ($3,273) were low, they must have sold the house in the early part of the year. This was the last year they had house in the return, they must lived in the governor’s mansion provided by the state of Indiana.

This year the Mr. Pence starts to contribute to HSA, which meant they had chosen a high deductible medical insurance plan. They contributed the maximum amount $6,450, and had $1,200 out of pocket medical expense.

2014

The family’s income continue to fall in 2014 down to $106K. Mrs. Pence’s business didn’t help much with gross income being only $845, and net income $634. To help making the ends meet, they distributed $40,000 from pension. They also started to take student loan, as they claimed student loan interest deduction of $952.

Normally one has to pay a 10% penalty for early distribution, but they applied for an exception “separation from service after age 55” (code 01). I doubt this was the right reason code as Mr. Pence was not separated from service. The proper code would be 08 (“Higher education purposes”).

This year they also got the full education credit $5,000 for two students. I am not sure why Audrey was not in the list, either she got a scholarship, or not a full time student for the year, or the accountant made an error.

They took a standard deduction this year, since they sold the house and I believe they did not make donation large enough to itemize.

2015

2015 was the last year for which the tax return was available. In this year, the income was similar to last year, $109,807. Mrs. Pence started a business, “That’s My Towel Charm Inc”, which many people considered as silly. The business has a loss of $3,407.

Again they took a distribution of $9,370. The amount seems odd, it is likely that was all the money left in the retirement account of Mr. Pence, considering that Mrs. Pence had only $1,540 in her ROTH IRA. I do not understand Why it was considered as normal distribution (code 7) since Mr. Pence had not reached 59.5 years old.

This was the year in which Michael J. was no longer a dependent, because he had reached 24. They got the maximum education credit of $5,000 for the two daughters. They were also able to claim the maximum student loan interest deduction $2,500.

Despite of the student loan, and the reliance on the retirement savings, they donated $8,723 which they deducted from the return. Also deducted is the personal property tax $109 on the car, which was modest or even old that must be used by Mrs. Pence. Many of my clients had luxury cars and paid a lot of more car tax.

Postscript

If we use Alternative Minimum Tax (AMT) as a dividing line between upper middle class and middle class, the Pence family was a solid middle class. They were able to get in part or in whole all the deductions and credits. Like many middle classes, they had to take mortgage loan and education loan. They struggled when their children started to go to college.

The family’s economic condition must have dramatically improved since Mike Pence took the new job as the vice president of United States, which paid him $243,500 (2018), more than doubled his salary as governor, and includes free housing. However, we do not have a tax return to see this. As Mr. Trump decides not to release his tax returns, I believe Mr. Pence does not want to embarrass his boss by releasing his returns alone.

Many new immigrants do not know their economic position in the US, you may want compare your family income with that of Pence family. It is likely yours is higher than the vice president, and higher than the vice president and president combined if Mr. Trump takes $1 as salary as he said he would take.