Over the weekend, we learned something about GOP presidential candidate Donald Trump. And I think it is something all Americans can learn and benefit from.
Of course, I am referring to the revelations in the New York Times that in 1995, Trump declared a $916 million loss on his income tax returns that year.
That loss permitted Trump to take a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years.
Here’s how the NYT writes it:
Tax experts hired by The Times to analyze Mr. Trump’s 1995 records said that tax rules especially advantageous to wealthy filers would have allowed Mr. Trump to use his $916 million loss to cancel out an equivalent amount of taxable income over an 18-year period.
Although Mr. Trump’s taxable income in subsequent years is as yet unknown, a $916 million loss in 1995 would have been large enough to wipe out more than $50 million a year in taxable income over 18 years.
Before we delve into this topic, I want to say something for the record. That is, I am not writing this in support of either major-party candidate. While I do the respect strong advocacy of each, I just don’t share a zeal for either this cycle.
But as someone who pays very close attention to the stock markets, personal finance and the news cycle, I want to call attention to the Trump tax talk for what it is — a teachable moment for us all in taking advantage of the tax laws.
As a patriotic American, I think all citizens should pay the taxes they owe.
Yet that same patriotism makes me think that citizens should not pay more taxes than they actually owe.
If you have plenty of money left over after you pay your legitimate tax bill, and you still want to fund charitable and/or other projects with that money, then I say go for it.
What I don’t want to see happen is for anyone reading this to hand over more of his/her hard-won income to the black hole that is the U.S. Treasury.
That’s certainly what it appears Trump has done here, as his team of accountants knew they could defer losses from business failings to help offset income from future business successes.
As an article today in MarketWatch aptly puts it:
The tax treatment of losses, bound to become a subject of national debate, is a normal, usually uncontroversial feature of the income-tax system. The government doesn’t pay net refunds when business owners lose money, but it lets taxpayers use those losses to smooth their tax payments as they make money. That reflects the fact that "the natural business cycle of a taxpayer may exceed 12 months," according to a congressional report.
Now, regardless of what side of the political aisle you’re on, the current provisions in the tax code are what they are.
Anyone — Trump, the Clintons, you or I — would be foolish not to take full advantage of them to maximize our respective tax positions.
Of course, taking advantage of deductions from business losses is a complex subject. That’s because complexity is perhaps the salient feature of our gargantuan tax codes.
That’s why you need to make sure that you have a professional accountant, tax preparer or CPA handling your taxes and advising you on how to take advantage of every legitimate deduction, tax-mitigation strategy and "loophole" in the system that the current complexity offers.
In fact, you owe it to yourself and your family and your heirs to only pay the taxes you are legally obligated to pay.
Any more than that is essentially depriving yourself and the people you love from the fruits of your labor.
So, if you are someone with a decent income … or if you are retired, getting investment income … and are currently in a higher tax bracket than you should be, then you owe it to yourself to seek out competent tax professionals.
Do not just rely on software such as TurboTax or other similar do-it-yourself platforms. And, don’t skimp on spending money on good professional advice.
No matter what kind of expert you are in life, or how smart you are, you probably don’t have the same expertise as a seasoned accountant when it comes to maximizing your financial/tax picture. And even if you are well-versed in the tax code, you don’t want to "operate on yourself," as the medical term goes.
So don’t take a shortcut. Spend the requisite time and money on good professional services. Your bank account will thank me later.
What do you think about Trump’s tax situation? Are you mad that our tax code is so complex that we all are forced to hire professionals? Have you ever regretted hiring a tax professional? If want to know what you think, so leave me a comment on our website or send me an e-mail.
The first day of the fourth quarter saw U.S. stocks dip into the red. The Dow tumbled 100 points within the first 15 minutes of Monday’s trading session, although it managed to halve those losses by the closing bell. The Industrials closed down 0.3%.
• Bass Pro Shops reels in Cabela’s (CAB). The privately held sporting goods retailer’s $65.50-per-share cash offer sent CAB shares up 15% today, to $63.18. The deal, valued at $5.5 billion, is set to close in early 2017.
• WTI crude gained another 1.2% post-Algiers, on news that Iran President Hassan Rouhani called for other oil-producing countries to help stabilize the market and boost prices.
• Save the Date: March 2019: The UK plans to trigger Article 50 of its constitution this coming March, which gives the nation up to two years to complete its exit from the European Union. This weekend’s news of the "hard Brexit" sent the pound sterling down to a three-year low against the euro, and seven-week low against the U.S. dollar.
• The Chinese yuan became part of the International Monetary Fund’s Special Drawing Rights basket on Oct. 1. It joins the greenback, euro, yen and pound as a reserve currency. It’s the first addition to the basket since 1999, when the euro replaced the Deutsche mark and French franc.
• One last election-related note: Longwood University in Farmville, Va., will host Tim Kane and Mike Pence for the only vice presidential debate of the season at 9 p.m. Tuesday. Two more presidential debates are on the calendar, for Sunday, Oct. 9 and Wednesday, Oct. 19.
Good luck and happy investing,
Uncommon Wisdom Daily