Donald Trump paid no income tax in his final year as president, according to his tax returns, which were submitted to a congressional committee and are expected to be released within days.
Despite earning nearly $11 million in interest on his investments in addition to his nearly $400,000 salary, Trump did not pay income tax as he also reported a loss of $16 million from its real estate business. The loss put the former president in the red by nearly $5 million for 2020.
This means he had no taxable income and paid no income tax.
This pattern of high investment returns offset by high business losses continues throughout the tax filings the House Ways and Means Committee has obtained and released as part of the largest reports on the presidential audit system of the United States. IRS this week.
In 2019, Trump reported about $20 million in investment income, offset by $16 million in real estate losses.
His investment gains were offset by trading losses of $11 million in 2018, losses of $16 million in 2017, and losses of more than $76 million in 2015.
All of these losses stem from a large loss of more than $105 million reported by the Joint Committee on Taxation in 2015, which was itself part of a $700 million loss dating back to 2009.
By spacing out this mega-loss, tax experts say Trump was able to reduce his tax liability year after year, ensuring he never received an outsized bill from the IRS.
Trump paid no taxes for years and years. How does he do that? By losses. Using losses as a hedge,” said Steve Rosenthal, a tax analyst with the Urban-Brookings Tax Policy Center who has tested Trump’s taxes in Congress, in an interview.
Other tax experts said it was incorrect to describe Trump as having used tax shelters, arguing that he suffered real losses.
His old losses are not “tax shelters”. These are losses he has suffered and which are carried over from year to year. If he never suffered losses, he couldn’t afford them,” Steve Goldburd, a tax attorney and partner at Goldburd McCone law firm in New York, said in an interview.
Goldburd pointed out that although Trump paid no income tax in 2020, the former president made payments of his estimated taxes while deferring portions of his refunds from previous years.
“He continually pays estimated taxes,” Goldburd said. Three million [dollars] in 2020 plus a rollover of $10.6 million for 2019. In 2019 it was $700,000 plus a rollover of $9.8 million from the previous year.
Goldburd said the losses in the real estate world faced by building owners like Trump might not even be because buildings are losing money, but rather because of maintenance costs that can be amortized.
As a real estate professional, [Trump] has the right to bear those losses,” he said. “These losses may be from actual losses, but more likely from real estate depreciation expenses. These entities may not actually be losing money, but in fact have the depreciation that wipes out the partnership’s revenue.
Trump is not accused of breaking the law by using his business losses to shield his income from being taxed.
But Trump’s approach to paying taxes, which he loved to practice, as well as accounting practices that exempt him from tax burdens that most Americans face, raise broader questions about the tax code.
“These are far bigger issues than Donald Trump. Trump’s returns likely resemble those of many other wealthy tax evaders – hundreds of partnership interest, highly questionable deductions and debts that can be moved to clear tax debts,” the chairman of the finance committee said. Senate, Ron Wyden (D-Ore). said in a statement Wednesday.
We need legislation to simplify the tax code, especially in the area of partnerships,” he said. “Stopping the games that wealthy tax cheats are playing with their partnerships will be a priority going forward.”
Wyden has legislation he says will close gaps related to partnerships to help simplify the tax code, but insiders warn of institutional forces in Washington that could step up to block moves like this.
“Every loophole has a constituency,” Rosenthal said. Very often, nobody defends the public interest. There’s just a whole bunch of constituent interest, and those can be purchased quite easily.
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