According to his tax returns, which were presented to a congressional committee and are expected to be published within a few days, Donald Trump paid no income tax in his last year as president.
Although Trump collected almost $11 million in interest on investments in addition to his salary of almost $400,000, he paid no income taxes as he also reported a $16 million loss from his real estate deals. As a result of this loss, the former president was almost $5 million in the red for 2020.
That means he had no taxable income and paid no income tax.
This pattern of high investment returns, offset by heavy business losses, continues in the tax returns that the House Ways and Means Committee obtained and released this week as part of more comprehensive reports on the IRS presidential audit system.
In 2019, Trump reported investment income of around $20 million, offset by real estate losses of $16 million.
His investment gains were offset by business 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 are due to a large loss of more than $105 million reported by the Joint Tax Committee in 2015, which was itself part of a $700 million loss dating back to 2009.
By limiting this mega loss, tax experts say Trump was able to reduce his tax liability from year to year and ensure that he never received an oversized bill from the IRS.
“Trump hasn’t paid any taxes for years. How does he do that? Through losses. By using losses as a protective tool,” Steve Rosenthal, tax analyst at the Urban-Brookings Tax Policy Center, who testified before Congress about Trump’s taxes, said in an interview.
Other tax experts said it was incorrect to describe that Trump had used tax havens and argued that he had suffered real losses.
“His old losses aren’t ‘tax havens. ‘They were losses he suffered and that are carried over from year to year. If he never suffered the losses, he wouldn’t be able to bear them,” said Steve Goldburd, tax attorney and partner at Goldburd McCone law firm in New York, in an interview.
Goldburd pointed out that although Trump paid no income tax in 2020, the former president paid his estimated taxes while taking over portions of his refunds from previous years.
“He pays estimated taxes all the time,” Goldburd said. “Three million [dollars] in 2020 plus a $10.6 million rollover for 2019. In 2019, it was $700,000 plus a $9.8 million rollover over the previous year.”
Goldburd said the losses in the real estate world faced by building owners like Trump may not even be due to the fact that the buildings are losing money but to maintenance costs, which can be written off as depreciation.
“As a real estate professional, [Trump] has the right to accept these losses,” he said. “These losses may be due to actual losses, but more likely to property depreciation costs. These companies may not actually lose money, but they actually have the depreciation that nullifies the partnership’s income.”
Trump is not accused of breaking any laws by using his business losses to protect his income from tax liability.
Trump’s approach to paying taxes, which he has likened to a sport, along with accounting practices that exempt him from the tax burdens most Americans face, however, raises wider questions about tax legislation.
“These are issues that are much bigger than Donald Trump. Trump’s returns are likely similar to those of many other wealthy tax fraudsters — hundreds of partnership interests, highly questionable deductions, and debts that can be deferred to pay off tax liabilities,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said in a statement Wednesday.
“We need legislation to simplify tax legislation, particularly in the area of partnerships,” he said. “In the future, it will be a priority to put an end to the games that wealthy tax fraudsters play with their partnerships.”
Wyden has laws that he says will close loopholes associated with partnerships to simplify tax legislation. However, insiders warn of institutional forces in Washington that could mobilize to block initiatives like this.
“Every loophole has a constituency,” said Rosenthal. “So often, no one stands up for the public’s interest. There are simply a whole range of constitutional interests, and they can be bought pretty easily.”
At an event in November, Fred Goldberg, who was the commissioner responsible for the IRS under George H.W. Bush, said that simplifying tax legislation should be an overarching goal of lawmakers.
“It’s been the Holy Grail for 40 years,” he said.
This story was updated at 9:23 a.m.