'I love depreciation': How big companies use Trump-like maneuvers to play the tax code in their favor
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The New York Times published a report on Sunday evening detailing the most information we've received to date regarding President Donald Trump's tax returns. Reporters Russ Buettner, Susanne Craig, and Mike McIntire wrote that Trump had "paid no income taxes at all in 10 of the previous 15 years — largely because he reported losing much more money than he made," and added that Trump paid $750 in taxes in 2017 and in the year he won the presidency. Trump tweeted Monday morning, "I paid many millions of dollars in taxes but was entitled, like everyone else, to depreciation & tax credits." While it seems like a sleight of hand to reduce a tax bill to next to nothing, it's entirely legal for businesses to utilize items such as net operating losses, accelerated depreciation, and tax credits to reduce their tax liability. A company can report a net operating loss if their deductions exceed their taxable income. This operating loss can be carried forward to future tax years to reduce taxable income, and thus tax liability. Before the 2018 implementation of the Tax Cuts and Jobs Act (TCJA), businesses were allowed to carry net operating losses forward for 20 years and backward two. For tax years beginning January 1, 2018, or later, there's an indefinite carryforward period for net operating losses; however, they're limited to 80% of each subsequent year's net income and the two-year carryback provision has been removed, except for certain farming losses. For losses that originated in tax years beginning prior to January 1, 2018, the former tax rules apply. The Trump Organization comprises around 500 business entities ranging from real estate to golf courses, hotels, and resorts, among other ventures. According to The New York Times, in 1995, Trump reported a $916 million net operating loss, and Trump golf courses have reported losses exceeding $315 million since 2000. In both instances, he could use the losses to reduce his tax liability in future years. In addition to net operating losses, during a 2016 presidential debate, Trump was quoted saying, "I love depreciation," an accounting method used to allocate the cost of assets over their useful life. By recording a decrease in the value of an asset, the depreciation reduces the amount of taxes a business pays. The larger the depreciation expense, the lower the taxable income, resulting in a lower tax bill. As Trump's companies include large depreciable assets in the form of real estate and commercial properties, he understands the value of depreciation and its impacts on taxes. While many find Trump's use of tax law controversial, it's not illegal. Tax avoidance is a common strategy among businesses who take legal advantage of the tax code to reduce or eliminate their tax liability. It's apparent Trump has benefited, but he's not the only business to do so. Amazon paid virtually no US federal income tax in 2017 and 2018 as a result of tax perks related to the distribution of billions of dollars of stock options to executives and key employees. Netflix also paid practically no US federal income tax in 2018 as a result of tax credits primarily attributed to changes laid out in the Tax Cuts and Jobs Act. In fact, a 2019 in-depth analysis from the Institute on Taxation and Economic Policy reported that 60 Fortune 500 companies avoided paying federal income tax for the 2018 tax year as a result of the new law. The report included household names such as Delta Air Lines, General Motors, Whirlpool, and IBM. When analyzing how The Trump Organization's treatment of tax loss carryforward and depreciation compares with their direct competitors, such as Starwood Capital Group LLC and Rockefeller Group International, Inc., it's hard to say. As they're private companies, they're not required to publicly disclose their financial statements. Steven Rosenthal, a senior fellow with the Urban-Brookings Tax Policy Center, told Bloomberg in 2019 that "The real estate industry is notorious for throwing off lots of deductions, and real estate developers are notorious for paying very few taxes." In his 2019 divorce proceedings, for example, it became public knowledge that real estate developer and owner of Macklowe Properties Harry Macklowe hasn't paid income tax since the 1980s. During Tuesday evening's presidential debate, when asked if he paid $750 in federal income taxes for the 2016 and 2017 tax years, Trump responded, "I paid millions of dollars in taxes, millions of dollars of income tax." Democratic presidential nominee Joe Biden replied with, "Show us your tax returns." While not legally required to release his tax returns, he would be the first president in almost 50 years not to make them available. Trump has said he'll release his returns once he's done being audited, even though an audit does not restrict him from doing so. When addressing the amount of taxes he paid in 2016 and 2017, Trump said, "It was the tax laws. I don't want to pay tax. Before I came here, I was a private developer. I was a private business people. Like every other private person, unless they're stupid, they go through the laws, and that's what it is."SEE ALSO: There's a way to gift your family members millions when you sell your startup, tax free Join the conversation about this story » NOW WATCH: What happens to animals during wildfires
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Biden paid almost $300,000 in federal income taxes in 2019 as he readies debate attacks on Trump's shockingly low taxes
Summary List PlacementFormer Vice President Joe Biden released his 2019 tax returns on Tuesday, a dig...Summary List PlacementFormer Vice President Joe Biden released his 2019 tax returns on Tuesday, a dig at President Donald Trump hours before their highly anticipated face-off in the first presidential debate. Biden and his wife, Jill, a community college professor, earned a combined taxable income of $944,737 last year; much of the income comes from S-corporations used for Biden's speaking fees. They paid almost $300,000 in federal income taxes, a tax rate of about 31%, according to the documents. The American people deserve transparency from their leaders, it's why as of today, I've released 22 years of my tax returns. https://t.co/6fwL20fWeI — Joe Biden (@JoeBiden) September 29, 2020 The financial disclosures sharply contrast those of Trump's exposed in a comprehensive New York Times investigation published two days ago. The report found that the president has aggressively avoided tax payments, paying only $750 in federal income taxes for 2016 and 2017, and none at all in 10 of the last 15 years. Trump, who has broken the longstanding tradition of presidential-candidate protocol by refusing to release his tax records, has decried the bombshell report as "fake news." Biden makes far less money than his billionaire rival, but paid far more in taxes than Trump did in recent years. In 2016, the Bidens paid $87,000 in federal income taxes on earnings of $338,000 in 2016, and $3.7 million in federal income taxes on earnings over $11 million, mostly from book deals The issue is likely to come to a head during their first public showdown on Tuesday evening in Cleveland, starting at 9 p.m. ET. Biden's running mate, Sen. Kamala Harris, also revealed her 2019 tax returns with her husband Doug Emhoff, a lawyer, reporting more than $1 million paid in federal income taxes. Vice President Mike Pence published his tax documents during the 2016 campaign but hasn't released any since.Join the conversation about this story » NOW WATCH: July 15 is Tax Day — here's what it's like to do your own taxes for the very first time