LAS VEGAS, NV – AUGUST 16: General views of the Trump International Hotel Las Vegas on August 16, … [+] 2020 in Las Vegas, Nevada.
Some of the most sought-after information in recent history has been exposed: President Donald Trumpâs tax records.
On Sunday, The New York Times released a lengthy investigative report about the presidentâs tax obligations. The report illustrated a damning picture of a businessman who operatesâand built his ânet worthââupon business losses, rather than actual revenue.
The report comes just 36 days before the November election, and two days before the first presidential debate. It revealed Trumpâs questionable tax strategies, why heâs under IRS audit, and that heâs hundreds of millions of dollars in debt thatâs due to be repaid in full soon.
Before addressing what might be next for the president, understanding exactly what the New York Times report uncovered is key. One of the most damning details of the report is that Trump paid a mere $750 in federal income tax in 2016 and 2017. He paid no income taxes for 10 of the last 15 years.
For a man worth $2.5 billion, according to Forbes, a $750 tax bill seems ludicrous; paying no taxes at all seems unjust. But Trumpâs tax strategyâthough questionableâappears to be legal.
How is Trump a billionaire if he looks broke on paper? If you add up the net operating income of Trumpâs portfolio, it equals a massive $3.7 billion in assets. But thatâs before any liabilitiesâi.e. debtâare taken into account. Forbes estimates Trump has a whopping $1.1 billion in debt, which drops his net worth down to the reported $2.5 billion amount.
Hereâs the strategy as we understand it: Trump (or his accountants, rather) took advantage of the tax code to avoid paying taxes, despite his businesses raking in millions of dollars each year. They achieved this in part by writing off a great deal of his many business losses and categorizing personal costs that the IRS usually doesnât consider as business costs, like hairdressing. They also deducted the interest on Trumpâs debt.
In the past, Trump has bragged about using his debt to his advantage, once even referring to himself as the âking of debt.â Having debt reported on your taxes means youâre paying interest on what you owe. Debt interest is reported on a tax return, which lowers the profits of a businessâand thus lowers the tax bill. Trump has employed this method repeatedly on his taxes.
The NYT report revealed that Trump employed questionable moves like writing off $70,000 worth of hair-styling charges as business expenses, and writing off one of his mansions as an investment property, then writing off its property taxes as a business expense. These write-offs may have lowered Trumpâs overall tax bill. Both strategies are legal, but Trumpâs way of using them raises questions of systemic abuse.
âThe tax law permits individuals to take full advantage of the tax law for their benefit, and thereâs nothing wrong with that,â says Ruth Gretz, CPA, RDM Financial Group at Hightower. âWhat people need to differentiate is tax avoidance, which is legal, versus tax evasion, which is illegal. Itâs Important to understand the details, and until we do, caution should be exercised [when discussing Trumpâs taxes].â
Gretz says she believes Trumpâs taxes shouldâve been under investigation much soonerâespecially as the November election approaches.
âWhy is an individual under an active IRS audit permitted to be a presidential candidate for the United States?â Gretz asks. âThis stuff shouldâve been done during the vetting process.â
Still have questions on what exactly Trump did with his taxes? Hereâs a great explainer from Forbes senior contributor Kelly Phillips Erb.
Trumpâs tax audit. The president has been under audit by the IRS over the legitimacy of a $72.9 million tax return he received in 2010. The return was mostly a refund of taxes he paid from 2005 to 2008, plus interest. However, all refunds of $2 million and more must be approved by IRS auditors (although this doesnât always happen).
If the congressional Joint Committee on Taxation and IRS rules against him, stating he will have to pay the money back, he could be ordered to pay over $100 million back, including penalties and fines.
His gargantuan debt is due soon. The Times report uncovered that President Trump is personally responsible for repaying $421 million in debt within the next four years. That could be a tough bill to repay considering Trumpâs investments have dried up in recent years. The report finds Trump has less than $1 million ($873,000 to be exact) in stocks and bonds, according to a recent financial disclosure.
How financially burdened is Trump to other countriesâand what does that mean for national security? According to the Times report, Trumpâs businesses made $73 million in revenue from countries abroad in his first two years as president. The report points out that most of the revenue sources were from âcountries with authoritarian-leaning leaders or thorny geopolitics â for example, $3 million from the Philippines, $2.3 million from India and $1 million from Turkey.â
âThis president appears to have over $400 million in debt, $420, whatever it is, million dollars in debt,â said House Speaker Nancy Pelosi (D-Calif.) Monday morning on MSNBC. âTo whom? Different countries? What is the leverage they have? So for me, this is a national security questionâ¦ But our responsibility is to protect and defend and we have to make sure we know what exposure the president of the United States has, and what an impact it has on national security decisions for our country,â she said
I’m a Personal Finance Reporter for Forbes Advisor. Previously, I covered personal finance at other national web publications including Bankrate and The Penny Hoarder.
I’m a Personal Finance Reporter for Forbes Advisor. Previously, I covered personal finance at other national web publications including Bankrate and The Penny Hoarder. I’ve been featured as a personal finance expert in outlets like CNBC, Yahoo! Finance, CBS News Radio and more. When I’m not digging up the best ways to manage your money, I’m out traveling the world. Follow me on Twitter at @keywordkelly.
News – Trumpâs Taxes Are Finally LeakedâWhatâs Next?