What Trump Tax Returns Can Reveal After Supreme Court Ruling
President Donald Trump speaks to supporters at Joint Base Andrews before he steps aboard Air Force One for the last time as President on Jan. 20, 2021 at Joint Base Andrews, Maryland.
Pete Marovich | Pool | Getty Images
Former President Donald Trump’s tax returns are back in the news.
The Supreme Court rejected Trump’s efforts to protect the financial records from New York prosecutors on Monday. The unsigned order obliges Trump’s accountants to hand over taxes and other documents.
The eight year records litigation in 2011 was related to an investigation by Manhattan District Attorney Cyrus Vance Jr. into possible tax violations involving the Trump Organization.
A spokesman for Vance said the office will move quickly to enforce its subpoena with the president’s long-time accounting firm, Mazars USA.
It is unclear when or if the tax records will be made public.
In and of itself, a tax return doesn’t say everything about a person’s bottom line. However, when combined with other supporting documents, including a statement of assets, it can provide some insight into a taxpayer’s finances.
“When you look at a tax return, you can get a roadmap of the activities and transactions an individual has conducted over the year,” said Edward Reitmeyer, local tax partner at Marcum LLP in Philadelphia.
“It’s the summary of the year’s transactions in one document,” he said.
Form 1040 summarizes an applicant’s taxable income. However, the attached plans are Meat and Potatoes: they show the sources of a taxpayer’s income and claimed deductions.
Rent, partnerships and more
Whether your real estate empire is making a loss or you’re generating revenue through a network of transit businesses, Schedule E has the details of residential, vacation, and commercial properties.
Trump himself uses many limited liability companies to manage various aspects of his business.
“When someone was meeting with a potential client – and that client was a well-known international real estate developer – they would expect an extensive schedule,” Reitmeyer said.
Pass-through and partnership income would also be reported in Appendix E. The rental income is listed in line 3.
Keep an eye on the write-offs found on line 18. Depreciation is a tax deduction that you can make each year to cover the cost of your property while it is in use.
Appendix E may also include the name of a transit company that provides income to the taxpayer. However, it can be difficult to get the specifics of who it ultimately belongs to.
Medical workers wearing masks pass a thank you note outside Mount Sinai Hospital along the coronavirus pandemic on May 3, 2020 in New York City.
Alexi Rosenfeld | Getty Images
Deductible medical expenses, state and local taxes paid, and other itemized deductions are detailed in Appendix A.
Beginning with the 2018 tax year, the deduction for state and local taxes paid has been capped at $ 10,000 for individual applicants, so there is a limit to how much anyone with personal residence in a high-tax state like New York can write off those real estate income tax. Trump was a lifelong resident of New York until he officially declared himself a Florida resident in October 2019.
More from Personal Finance:
Most borrowers will not get a tax break this year
Still no stimulus test? What that means for your tax return
Many Americans, especially families, cannot live on a minimum wage of $ 15
Keep an eye on the “Gifts for Charity” section in Appendix A. Donations over $ 500 must be reported on Form 8283, the charitable donation form.
Taxpayers are required to describe the property donated and provide a summary of its estimated market value including art, real estate and cars.
Side appearances, sole proprietorship
Individuals running a sole proprietorship or sideline business from home would report profits, losses, and related business expenses in Appendix C.
You can get an idea of whether an entrepreneur has applied for the new qualified income allowance – a potential 20% tax break that went into effect in 2018.
Line 10 of the 2020 Form 1040 indicates how much a taxpayer has claimed for it. Forms 8995 and 8995-A provide additional details.
This new hiatus allows pass-through business owners, including suburban companies, partnerships and sole proprietorships, to withdraw up to 20% of their qualified business income.
Entrepreneurs in any industry can claim the 20% deduction if they have taxable income that is less than $ 163,300 if they’re single or $ 326,600 if they’re married and file together in 2020.
The IRS applies restrictions on these thresholds.
For starters, taxpayers in “a specific service or business,” including doctors, lawyers, and accountants, may not be eligible for the allowance at all if their taxable income exceeds $ 213,300 if they are single or $ 426,600 if they are married are.
The rules are slightly different for business owners who are not in “a specific service industry or business”.
In this case, if your taxable income exceeds the $ 163,300 / $ 326,600 threshold but is still below the $ 213,300 / $ 426,600 threshold, you will receive a reduced deduction.
Generally, if your business is not in a particular service industry or business and your taxable income exceeds the threshold of $ 213,300 / $ 426,600, your deduction will generally be capped as a percentage of the W-2 wages paid to your employees.
Interest, Dividends, and Capital Gains
FatCamera | E + | Getty Images
Appendix B details the interest on a bank account and the ordinary dividends paid.
This form shows you where some of these interest and dividend-paying investments are held, but it does not give you details of what exactly the taxpayer invested in.
What if you sold an asset? Refer to Appendix D for more information about the gains and losses on sales.
Applicants complete Form 8949 and note their purchase and sale dates and cost base in order to correctly fill out this schedule. It can serve as a window into the taxpayer’s trading activity.
Individuals who have sold an investment, made a capital gain, and then deposited the proceeds into a qualifying Opportunity Zone fund – a tax-advantageous way to invest in up-and-coming neighborhoods – must report them on Form 8997.