Democrats on the House Ways and Means Committee have been released Trump’s tax returns Friday, after losing a years-long legal battle to keep them private. The documents show the complex, and sometimes unusual, financial situation of the president.
The records illustrate how Trump, as a business owner and real estate developer, is eligible for a host of tax breaks that most taxpayers cannot claim. The documents, which cover 2015 to 2020, also detail how Trump was affected by the 2017 tax cut bill he signed into law.
The documents further show the sheer complexity of the tax code. As with many US business owners, filings span hundreds of pages to account for domestic and foreign assets, credits, deductions, depreciation, and more.
Here are some of the key takeaways from Trump’s six years of tax filings:
$0 tax payment
Trump paid no federal income taxes in 2020, reporting losses at dozens of properties and holding companies. The pandemic certainly played a role. An Irish golf resort owned by the former president previously reported a 69% drop in revenue in 2020.
Nevertheless, some properties still made money. Losses of $65.9 million in various entities were offset by gains of $54.5 million in others that year, according to returns.
In 2018, the year Trump had the biggest personal tax bill — $999,466 — he paid an effective rate of 4.1% on his income, well below the top individual rate of 37% set in his law of 2017.
Democrats have cited Trump’s low tax bills as a reason to overhaul the tax code, but have been unable to reach agreement on how to make major changes in the two years they have held seats. majorities in the House and Senate. Republicans will take control of the House next week, which means any major tax law changes will likely take years.
The Consequences of Trump’s Tax Law
Trump’s tax law was a mixed bag for him personally. He was able to benefit from certain provisions, including expanded write-offs for business expenses boosting his businesses and the reduction in the alternative minimum tax, or AMT, allowing him to claim more individual deductions.
The AMT was originally designed to capture income from wealthy individuals like Trump who managed to avoid paying taxes due to a series of write-offs, such as the depreciation of real estate that gained in value.
AMT has become politically unpopular over time as more and more upper-middle-class households are subjected to it, and the additional paperwork and compliance headaches that come with it. Republicans reduced it in 2017.
Trump has not yet been able to claim the 20% tax deduction his 2017 Tax Cut Act created for partnerships, LLCs and other small businesses. Trump has reported negative business income, also known as losses, from 2018 through 2020, making him ineligible for one of the centerpieces of his signature legislation.
This tax relief is due to expire at the end of 2025.
National and local tax limit
Trump’s statements also reflect the $10,000 cap he and Republicans enacted in their 2017 State and Local Tax Deduction, or SALT, tax law, reversing the millions he could otherwise claim each year on state and local taxes paid.
For 2019, Trump’s return says he paid $8.4 million in state and local taxes, but could only claim $10,000 under his tax laws. The following year was similar: $8.5 million paid, but again subject to the $10,000 limit.
Trump’s $10,000 SALT deduction cap has limited tax relief for many high-income taxpayers and has angered Democrats in high-tax states including New York and New Jersey. Previously, the deduction was unlimited for certain retail taxpayers.
Foreign links
As president, Trump was sued by congressional Democrats and Democratic attorneys general who accused him of violating the so-called emoluments clause of the US Constitution, barring presidents from receiving gifts from governments. strangers.
The documents do little to clarify the nature and extent of Trump’s overseas financial ties, but his return in 2020 – from when he ran for re-election and faced questions about its dealings with foreign adversaries – lists several entities that operate in China, including a Shenzhen hotel business.
Others of the hundreds of business entities listed also appear to operate overseas, including in Panama, Brazil and Baku, Azerbaijan.
Charitable donations
Trump said he gave relatively little to charity at the White House, including asking for no donations in 2020 at the height of the pandemic.
Trump gave the most during his tenure in 2017, when he donated nearly $1.9 million in cash. Trump gave around $500,000 in 2018 and 2019.
Charitable giving was a hot topic while Trump was in office. He agreed to shut down his charity, the Trump Foundation, in 2018 after allegations he was using the entity for campaigning and other personal activities.
Audit risk
The nonpartisan Congressional Joint Committee on Taxation noted dozens of potential deductions and other maneuvers that would likely come up in an audit.
House Democrats found the Internal Revenue Service failed to audit Trump during his tenure, but potential red flags raised by the joint committee could provide an audit card for the IRS if he pursues an examination.
Tax accountants also noted that Trump’s use of sole proprietorships, which are typically used for small, one-person businesses such as hairdressers or lawn care providers, is also a potential audit trigger for the IRS.
