4 Legal Ways Donald Trump Avoided Paying Taxes in the Past — And How You Can, Too
Written by
Dawn Allcot
Edited by
Nicholas Morine
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Though former president Donald Trump faces criminal charges for his alleged actions in 2020, according to multiple sources, it is not the first time Trump has been scrutinized. His tax returns fell under scrutiny and were released to a congressional committee in late 2022. They showed he paid no income taxes in 2020.
However, unlike some of Trump’s other alleged activities, the way he avoided a large tax bill was, according to experts, completely legal in spite of millions in gross income.
You may be able to use some of these proven techniques to reduce your tax liability, especially if you have money from rental properties, gig work, or your own business.
Legally Reduce Your Taxable Income through Business Losses
Trump’s businesses lost a lot of money in 2020, perhaps due to the COVID-19 pandemic and his focus on his responsibilities as POTUS. According to The Hill, he earned $11 million in investment income, plus a $400,000 salary (which was widely reported to have been donated out each year) as president. But, his real estate businesses lost $16 million that year, meaning Trump had no taxable income to show for his work.
It may not be possible for you to write down your entire salary through a failing business. However, make sure you are taking advantage of every deduction available to you, including allowable business expenses for side gigs, continuing education, tools you use for a W-2 job, and travel between two jobs.
Use Depreciation To Spread Out Business Expenses Across Multiple Years
In 2015, Trump’s business suffered a large loss of more than $105 million, according to the Joint Committee on Taxation. However, rather than writing that loss off in a lump sum, Trump used a concept called “depreciation” to space out the loss.
On a smaller scale, you can do this with many business-related expenses. For instance, let’s say you purchase a new vehicle for your Uber gig, or a new computer to earn money using ChatGPT. Rather than writing off the lump sum in one tax year, you can depreciate those business expenses across several years to space out the loss and reduce your tax liability.
There are also special rules related to depreciating real estate, which Trump likely took advantage of. “As a real estate professional, [Trump] is entitled to take these losses,” Steve Goldburd, a tax attorney, told The Hill. “These losses can be from actual losses, but more likely from real estate depreciation expenses. These entities may not actually be losing money, but in fact have the depreciation that’s wiping out the partnership’s income.”
Pay Quarterly Estimated Taxes
Goldburd also told The Hill that Trump has been paying quarterly estimated taxes for his businesses, leaving him with a smaller tax bill in April. He also rolls over his refunds to cover the next quarter’s taxes.
It’s recommended that small business owners and sole proprietors pay quarterly taxes to eliminate underpayment penalties and to reduce their federal tax bill when they file in the new year. If you are an employee who winds up paying taxes in April, you might consider speaking to your payroll or HR department about increasing your withholding taxes. You’ll get a smaller paycheck throughout the year, but might get a tax refund in April when you file.
Hire a Professional
The ultra-wealthy and business owners like Trump know the secrets and loopholes to minimize their tax bills. Businessmen like Trump tend to reduce tax bills under the trained guidance of tax professionals. Hiring a tax professional will likely help you find eligible, legal deductions to reduce your tax bill.
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