Take a look at the dollars and cents that fuel elections.
Donald Trump versus Hillary Clinton seems to be playing out like a boxing match instead of a presidential race. The idea of fighting fair has been thrown out the window, as both candidates deliver low blows and questionable hits.
No candidate is safe from media scrutiny, and that includes presidential hopefuls who dropped out of the race earlier this year. After failing to secure the Democratic presidential nomination, Senator Bernie Sanders bought a $600,000 waterfront home in Vermont. Many pundits accused Sanders of unlawfully using campaign funds for the purchase, though the transaction was legal.
This begs the question: How can political candidates use campaign finances, and are there tax credits for campaign contributions? Will spending trends point to the presidential winner? We’re here with answers.
Rules for Donors
Financially supporting your candidate or party of choice isn’t difficult, but there are contribution limits:
- $2,700 maximum per candidate per election2
- $5,000 maximum annually to political action committees (PACs)2
- $10,000 maximum annually to local, district, and state parties2
- $100,200 maximum annually per account to a national political party2
The Federal Election Commission (FEC) reviews and updates these contribution limits every two years to adjust them for inflation.
These contributions are not deductible on federal tax returns, though there are tax credits available in specific states:
- Arkansas: $50 for an individual, or $100 for a married couple for contributions made to candidates in state elections3
- Ohio: $50 for an individual, or $100 for a married couple for contributions made to candidates in state elections3
- Oregon: $50 for an individual who makes less than $100,000, or $100 for a married couple who jointly makes less than $200,0003
- Virginia: $25 for individuals, or $50 for joint filers for contributions made to candidates in local and state elections3
Rules for Candidates
Even though FEC rules place limits on individual donor contributions, there is no cap on how much money a candidate can raise for a campaign.
For example, in their most recent report to the FEC, Hillary Clinton and Donald Trump listed the following amounts for total campaign funds raised:
- Hillary Clinton: $526M5
- Donald Trump: $182.1M5
When political candidates run for office, they have a long list of campaign expenses they aren’t able to deduct, including legal fees and registration fees.4 They can’t count campaign contributions as personal income for tax purposes, because there are strict rules governing the use of these funds.
During the 2016 presidential primaries, 21 candidates (5 Democrats and 16 Republicans) dropped out of the race. The campaigns for these candidates had three main options for using leftover contributions: return the money to donors, donate to charities, or transfer the contributions to party committees.6
Unfortunately, there aren’t always extra funds available when a candidate drops out of a political race. In 2012, Newt Gingrich sought the Republican nomination for President of the United States. By the time he ended his campaign, he had accumulated $4.6M of debt to 114 different creditors.7 Gingrich has yet to repay this sizable campaign deficit.
The Winner Is?
From 1960 to 2012, the United States has held 14 presidential elections. 11 of the 14 elected presidents in this timespan spent more campaign funds than their opponents.8 If total expenditures determined the outcome of the 2016 election, Hillary Clinton would win, as she has spent $425.5M, and Donald Trump has spent $127.2M.5
This article is for general information purposes only.
1“Bernie Sanders Buys Vermont Lakefront Home for Nearly $600,000.” Associated Press. 4 October 2016.
2Wall, Ginita. “Are Your Political Campaign Contributions Tax Deductible?” TurboTax. 4 October 2016.
3Wolff-Mann, Ethan. “These Four States Will Pay for Your Political Contributions.” Time. 3 October 2016.
4Erb, Kelley Phillips. “Taxes from A to Z (2016): C is for Campaign Contributions.” 3 October 2016.
5Allison, Bill and Rojanasakul, Mira, and Harris, Brittany. “Tracking the 2016 Presidential Money Race.” Bloomberg. 14 October 2016.
6Watson, Libby. “What Happens to the Leftover Money After Each 2016 Candidate Drops Out?” Sunlight Foundation. 5 October 2016.
7Blumenthal, Paul and Delaney, Arthur. “Newt Gingrich Can’t Escape His 2012 Campaign Debt.” The Huffington Post. 14 October 2016.
8Galka, Max. “The History of Campaign Spending.” Metrocosm. 14 October 2016.