元大統領の税務申告書：実効税率の分かりやすい解説（パート1）

The House Ways and Means Committee publicly released Donald Trump’s Tax Returns on Dec 30, 2022, for 6 tax years from 2015 to 2020. Today we provide a summary table and simplified calculation of effective tax rate. 

Each tax return extends from 500 to 1000 pages. We note that the Tax Preparer for 2015-2019 was Donald Bender from Mazars USA LLP. Then for 2020, the preparer was changed to Timothy P Horan of BKM Sowan Horan LLP (merged with CohnReznik in 2022). 

Table: Summary of reported Tax Returns 2015-2020

Zero Taxable Income and Tax
Provided in the summary table above, Donald Trump’s tax returns were $0 taxable income and $0 tax for 4 of 6 years (2015, 2016, 2017, 2020). It is noted that the first order calculation of $0 taxable income and $0 income tax are not used in the final net tax due.

AMT (Alternative Minimum Tax)
Tax avoidance can be legally achieved. In many of the years, the losses in business income, passive income (rental, real estate, etc.), and other income offset much of the income from the earned income, fixed and retirement income. Whether the losses were qualified and did not exceed limitations were permitted upon further audit, while the prepared tax return had claimed the qualifications. For claiming such exorbitant losses exceeding the income, we believe the IRS should have audited the tax returns.

Note that there were additional taxes due and paid, including self-employment tax, household employment tax, and Medicare. We propose to set aside these details, since the amounts are small (in thousands) relative to other tax amounts (in millions). 

The AMT is a separate tax calculation to ensure wealthy taxpayers, who may received many tax preferences, pay a minimum tax. The AMT rate for this case was 28%, and being higher than the income tax calculation, the total tax incurred $2 million to $7 million in taxes. Since the AMT calculation is higher than the Income Tax calculation, the AMT tax amount is used.

税額控除
The General Business Credit 3800 offset a significant portion of the taxes owed. What is the Form 3800? We will provide more details in further insights. For now, the net tax is the higher of Taxable Income calculation and AMT with offsetting the tax credits.

Simplified Effective Tax Rate
We take a simplified approach to determine the tax rate for total income.

– The capital gain was variable, from positive to very high gain. We may exclude it from the calculation, as it would only further decrease the effective tax rate.
– The losses from business, passive, and other income are excluded, taking an audit’s perspective where losses are not qualified.
Thus, we provide an answer — given the earned income, passive (interest/dividend), and retirement income, what was the effective tax rate on the respective total income?

For IRS tax brackets in 2024, the first bracket starts at 10% for up to $11,600. The tax brackets scale from 10%, 12%, 22%, 24%, 32%, 35%, to 37%.