Massive losses and large tax deductions in Donald Trump's returns reveal how the former president was able to use the tax code to minimize his income tax payments.
Democrats on the House Ways and Means Committee released Trump's tax returns Friday, after he lost a multi-year legal battle to keep them private. The documents show the president's complex, and sometimes unusual, financial situation.
The records illustrate how Trump, as a business owner and a real estate developer, is eligible for a bevy of tax breaks that most taxpayers can't claim. The filings, 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 for many U.S. business owners, the 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 six years of Trump's tax returns:
1. $0 Tax Payment
Trump paid no federal income taxes in 2020, reporting losses at dozens of properties and holding companies. The pandemic almost certainly played a role. An Irish golf resort owned by the former president previously reported a 69% plunge in revenue in 2020.
Nonetheless, some properties still made money. Losses of $65.9 million at a variety of entities were offset by $54.5 million in gains at others that year, according to the 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 37% individual rate set in his 2017 law.
Democrats have cited Trump's low tax bills as a reason to overhaul the tax code, but were unable to find agreement on ways to make major changes during the two years they held majorities in both the House and Senate. Republicans gain control of the House next week, meaning that any significant tax law changes are likely to be years off.
2. Tax Law Consequences
Trump's tax law was a mixed bag for him personally. He was able to benefit from some provisions, including expanded write-offs for businesses expenses boosting his companies and the scaling back of the alternative minimum tax, or AMT, allowing him to claim more individual deductions.
The AMT was originally designed to capture income for wealthy individuals like Trump who managed to avoid paying taxes because of a series of write-offs, like depreciating real estate that is actually gaining value.
The AMT became politically unpopular over time as more upper-middle class households became subject to it and the additional paperwork and compliance headache that come with it. Republicans pared it back in 2017.
Trump has yet to be able to claim the 20% pass-through tax deduction his 2017 tax-cut law created for partnerships, LLCs and other small businesses. Trump reported negative business income, also known as losses, from 2018 to 2020, making him ineligible for one of the centerpieces of his signature legislation.
That tax break is scheduled to expire at the end of 2025.
