Follow the money. Always follow the money. – Deep Throat

Recently the New York Times published an analysis of 20 years’ of President Trump’s tax returns, concluding that he paid no taxes in 10 of the last 15 years and just $750/year during the first 2 years of his presidency.

Is something dubious going on? Or is this quality advertising for his accountants?

I’m tax-curious… let’s follow the money.


Paying as much tax as legally required (and not a penny more) has been a long-standing cornerstone of US tax policy and public sentiment. Individuals and business are expected to utilize every deduction, exemption, and credit available to them.

Tax avoidance / tax minimization is fair and proper. Tax evasion is… not. Even so, we often hear calls for the rich to pay their “fair share.”

Is $750/year in income tax a fair share for a self-proclaimed billionaire? That is up for each voter to decide for themselves.

But let’s look at the numbers.

(The New York times brings up other issues – national security risk, emoluments, pay to play, conflicts of interest, nepotism, etc… I leave those topics for another day.)

“Billionaire” Tax Burden

I have shown repeatedly that it is possible for a married couple to earn ~$100,000/year and pay little to no income taxes.

But if you are in control of more than $1 billion in assets, have multiple streams of income from book deals, royalties, brand licensing, hotels, golf courses, and numerous other businesses, with incomes of $100+ million/year, how is it possible to get to a $0 or $750 tax burden?

Easy: lose lots of money. No profit means no taxes.

The hard part is losing $100 million dollars year after year after year, and still, you know, living.

Chart of income and loss

The NYT has a beautiful interactive graphic of the President’s income and losses

The Business of Losing Money

To be successful at the business of losing money requires having positive cash flow and (primarily) paper losses.

Real Estate is perfect for this (Related: Never Pay Taxes Again Using Rental Properties.)

An oversimplified example:

Let’s say you buy a rental property for $1 million. It has revenue of $100k/year and operating expenses of $20k/year.

Of course you don’t pay cash – you get money from a bank, perhaps one in Germany or Russia. Ideally, as an interest only mortgage with zero personal liability (if you default, the bank can only take the property, nothing you own personally.)

The interest on the loan is deductible – let’s say $50k/year.

Also deductible is depreciation – in the case of commercial real estate about 2.5% of the property value each year (39-year property), or another $25,000/year deduction.

But wait, there’s more!

You didn’t just buy a $1 million property, you bought an $800,000 property with $50,000 of appliances (5-year property), $50,000 of office furniture and fixtures (7-year property), and $100,000 of electrical systems, natural gas systems, and sewage pipes (10-year – 25-year property.) This common process is called cost segregation, and it increases deductions to maybe $45k/year.

$80k net profit – $50k mortgage interest = $30k profit / positive cash flow
Minus $45k depreciation equals $15k tax loss.

You are now cash flow positive, while also having a paper loss to offset profit elsewhere –> $0 tax bill.

Rolling over the loans

Interest-only mortgages often have balloon payments – you pay interest only for 5-7 years and then the entire loan in full (usually by getting another mortgage.)

And as you know, property always goes up in value (lol) – so you replace the old $1 million mortgage with a $1.25 million one and get $250k in pocket money. (It’s debt, not income –> no tax.)

This is where the big money is.

The depreciation, however, is always based on the original purchase price… so with a good property you will trends towards a taxable profit.

This is the case here also: Trump Tower and Trump World Tower are both very profitable ventures.

Whose income is offset with some very unprofitable ones.

Golf Courses

The Apprentice and related licensing generated a ton of profit ($400+ million), most/all of which appears to have been sunk into golf resorts around the world. All of which lose a lot of money – $315 million in loss since 2000 (and counting.)

As a business, golf courses benefit from all of the same deductions, exemptions, and credits as any other, including depreciation, with one nuance – golf courses are primarily land, land itself is not depreciable. There are nuances to golf course taxation that I don’t care to explore – but it seems these losses are more real than paper. (“Real”)

Overall Tax Summary

In short – thanks to interest only mortgages, cash out refinancing, generous real estate related tax benefits (depreciation), and an overall unprofitable business empire, it is possible to live richly while paying zero to little in taxes. (maybe)

This is all legal and completely above board. Encouraged even.

And it isn’t every year – a copy of the 2005 tax return (peak Apprentice earnings – more on this later) shows $38 million in federal income tax paid (25% effective tax rate.)

So it appears that all the president’s taxmen were doing what any good accountant should do for an individual who repeatedly loses insane amounts of money…

Don’t hate the player, hate the game – IceT


… things do start to look a bit sketchy…

The Summer Home

One way to reduce tax burden is to give money away to charity.

Over the period reviewed, the President claimed charitable donations of $130 million, a generous sum. Of this, $119.3 million (90%+) is in the form of a conservative-easement deduction… agreeing not to develop a property. (Read: no money changes hands.)

In the case of the Seven Springs property, this appears to be after nearby residents used legal means to prevent development. When life hands you lemons, turn them into a tax deduction.

Additionally, while this property seems to be primarily used as a personal retreat for the family, it is treated as a business for tax purposes. This allowed writing off $2.2 million in property taxes, whereas individuals are only allowed to deduct $10k in property and state tax, and then only if they otherwise itemize.

Looks like a nice place to visit though – maybe I just couldn’t find the Airbnb listing.

Seven Springs Estate – photo via

Creative Write-offs

$70,000 for a toupee.

$95,464 for a makeup artist for a “consultant” (the daughter.)

$1.9 million for a legal defense fund for the son

Generally all of this is considered non-deductible by the IRS, but it is routinely written off on the President’s tax returns. That’s a no no. It makes you wonder what else is buried in there.

When I said write it all off, I meant legally.

The $73 Million Tax Refund

And perhaps the most interesting issue is a claim for a $73 million tax refund.

During the 2008 Financial Crisis, it was allowed to carry-back losses to previous years (use 2008 losses to offset gains from 2005+.) Thanks Obama!

The President’s taxmen claimed losses of $1.4 billion for 2008 – 2009, and used those losses to offset most (all?) of profits from the Apprentice (peak earnings 2005-2008.)

Whether this was legitimate is still in question – the audit is still underway some 10 years later.


The truth is, these are not very bright guys, and things got out of hand. – Deep Throat

Tax returns by themselves don’t disclose everything, and without seeing the actual returns we are speculating, but overall the NY Times article is very well written. I have done my best to clarify the findings for personal curiosity’s sake, but recommend reading the article in its entirety.

How much or how little tax was paid isn’t the important point, although it will probably get the most attention. As highlighted, thanks to interest only mortgages, cash out refinancing, generous real estate related tax benefits (depreciation), and an overall unprofitable business empire, it is possible to live richly while paying zero to little in taxes (as long as someone is willing to keep the refinance train going.)

The US tax code can be very generous. However, I do prefer business people who actually make money.

There does seem to be some questionable / dubious practices highlighted, which could be considered tax evasion. Hi Al Capone! But a thorough audit would be required to say for sure. Complex tax issues are not always black and white, and it is common practice to err on the side of paying less tax. However, there seems little reason to give the President the benefit of the doubt, based on a history of tax fraud, misuse of charitable funds. and shafting small-business owners. (Given the history – I reject the idea that “he is a terrible businessperson” – this seems more like an intelligently implemented money laundering system.)

The New York Times does mention that it has more to share, and we should expect to learn more in the coming weeks. I eagerly await a deeper understanding.

Is $750 in tax reasonable? How does it compare to your tax bill?