In November, President Trump confirmed that he would refuse a presidential salary. This week, White House Press Secretary Sean Spicer announced that the President was donating his first quarter salary to the National Park Service (NPS).
The donation was announced during Spicer’s press briefing on April 3. During the briefing, Spicer presented a check in the amount of $78,333.32, representing one-quarter of his annual presidential salary, to the Secretary of the Interior, Ryan Zinke, and superintendent for Harpers Ferry National Historical Park, Tyrone Brandyburg. The donation has been earmarked for repairing historic battlefields. Secretary Zinke said, about the gift, “These historic places tell the story of conflicts that helped shape our country’s history, and they also honor the many men and women who have given their lives in service of this great nation. I’m honored to help the president carry out his love and appreciation for our warriors and land.”
According to the NPS, 25 of their sites are classified as National Battlefields, National Battlefield Parks, National Military Parks and National Battlefield Sites. Antietam National Battlefield in Maryland, which commemorates the battle that led to President Abraham Lincoln’s issuance of the preliminary Emancipation Proclamation, saw over 350,000 visits last year while Gettysburg National Military Park saw over 1 million visits.
(You can read more about the NPS here.)
President Trump had previously announced that he would refuse a White House paycheck, telling CBS news anchor Lesley Stahl that he did not even know what the presidential salary might be. When Stahl advised him that it was $400,000 per year, he stated:
No, I’m not gonna take the salary. I’m not taking it.
Even as Zinke praised the president’s philanthropy, the internet buzzed about whether Trump could claim a charitable deduction for the gift. The answer is yes – assuming he took the amount into income and assuming he itemizes his deductions.
Trump will likely have to claim the funds as income because that’s the way salaries work: they are payable to the person who performs the services and has control over the distribution of funds. When it comes to wages, typically the person who earns the money is responsible for the tax consequences even if that person isn’t the final destination for the funds: that’s true whether the money ultimately lands in your child’s pocket or a charity.
With respect to the deduction, most high-income taxpayers itemize their deductions and I suspect that Trump is no different (that hasn’t been confirmed since the President has not released his tax returns). You must itemize in order to claim a charitable deduction.
Restrictions on charitable donations apply whether they’re for you and me or for a billionaire. Last year, for example, Warren Buffett advised that he had made $2.9 billion in charitable contributions in 2015, about 75% of Trump’s net worth, but could only deduction allowable charitable contributions of $3,469,179. That’s because, by law, the amount you can deduct for charitable contributions cannot be more than 50% of your adjusted gross income (AGI) for the year: your deduction may be further limited depending on the nature of the donated property and the type of charitable organization. If your contributions are more than those limits, you can carry over those deductions for up to five years (limits on contributions are also carried forward each year).
But what about skipping the President altogether? If the President had been able to decline the payday altogether and have it payable directly to the NPS, then it would have been a wash in theory: no income and no corresponding charitable deduction. That’s because the Internal Revenue Service (IRS) likes to match income to deductions. But keep reading.
That may all sound like semantics but it’s a distinction that matters come tax time since restrictions on charitable deductions, itemized deduction limitations for high-income taxpayers, and the dreaded alternative minimum tax (AMT) can all affect a taxpayer’s bottom line. That combination means that it’s not always the case that reporting income and the subsequent deduction results in a wash for tax purposes. If you think you’ve heard this discussion before, you likely have in a different context: it’s one of the reasons for the charitable IRA rollover law that lets IRA owners make direct gifts of up to $100,000 to charity.
As for the application of Trump’s charitable contribution? Zinke intends to put it towards deferred maintenance at battlefield sites: the NPS currently has a backlog of nearly $12 billion in deferred maintenance overall. That’s not likely to get better any time soon: under the President’s proposed budget, the NPS would lose an additional 11.7% or $1.5 billion, in funding and be subject to a hiring freeze.
