You can pay less in taxes like Donald Trump

In case you missed it, The New York Times recently published an article stating that the year Donald Trump was elected president he only paid $750 in income taxes. The article claims that Trump has not paid income taxes in the past 10 to 15 years because of losses he has taken on his businesses. Trump negated this on Twitter claiming he has paid millions in taxes, but like everyone else in the U.S. has legally utilized depreciation and tax credits.

While we are not able to view the tax return statements that are referred to in the article, nor via Donald Trump, it’s safe to say that regardless of how much money is written off, Trump writes off at least some of his taxes. Which raises the question; how can we all pay less in taxes, like Donald Trump?

Disclaimers:

1. I am in no way endorsing Donald Trump as a presidential candidate. Politics is in fact one of my least favorite things to talk about, and I can honestly say I’m not a huge fan of either candidate.
2. I’m not a CPA or tax expert. If you want a more technical answer please consult one of them. This is just my understanding of how to leverage tax deductions based on personal experience

When talking about tax deductions, it’s important to first understand that taxes work differently for an individual versus a business. Generally speaking, there are more opportunities for a business to claim deductions than there is for an individual on their income. To compare, here’s how each of them work:

For individuals, taxes are paid based on income from the entity you work for. and are paid before you ever touch the money. This means you never physically see the money you are taxed, only post-tax dollars.

For businesses, taxes are based on income once all expenses are paid. While a business might ‘make’ a million dollars in revenue, if it has $600k in expenses then it only generated $400k in income and will pay taxes on that. Their taxes are not paid until income is reported at the end of the year, making deductions more accessible.

For both individuals and businesses, it’s possible to legally leverage tax deductions. Tax deductions are expenses you have that can be exempt from taxation. Oftentimes, these are investments in either yourself or in the case of businesses, the business itself. It’s important to understand that for businesses the list of eligible tax deductions is far more extensive than that of an individual. For a full breakdown of what can and can’t be deducted check out deductible business taxes or deductions for individuals, both directly from the IRS.

As someone that owns multiple businesses, Donald Trump likely writes off as many tax-deductible assets or purchases as possible for those businesses. This is possible and beneficial for two reasons.

1. It helps businesses grow as they have more money to invest in themselves.
2. It’s good for the economy because the more businesses spend, the more stimulation there is in the economy.

The first point is self-explanatory, but to elaborate on the second businesses are incentivized to spend more money through tax deductions because by spending more money it allows other businesses to grow as well. As other businesses grow they are able to employ more people, and as a result of people being employed there is more stimulation in the economy — when you don’t have a job you don’t spend much money. If businesses like Trump’s were to instead take their income and not spend it on anything, just save it, that’s money that’s being taken out of the economy, thus reducing stimulation and hurting the unemployment rate.

This is not something that’s unique to large enterprises such as Trump’s. Anyone with a business, small or large, 1 employee or thousands, can leverage tax deductions. It only costs a few hundred dollars to register a business, and an idea, of course, to leverage business tax deductions for yourself. Similarly, any individual can leverage personal tax deductions such as ones for student loans, work-related expenses, and more. Trump is not in a special position due to his wealth, anyone can do this with a little bit of time and research.