Trump offsetting taxes after $916 million loss, a rather elementary working of tax code, says expert

Usually meant to help small business or startups

While much has been made this week about Donald Trump and his taxes, what may have been lost in the discussion is just how normal it is to do what Trump apparently did.

He may have carried an enormous loss forward and maybe used that to offset future tax bills, which is pretty common according to Jeff Schneider with Schneider Accounting in La Crosse.

“We see it quite a bit with small businesses that are just getting going,” Schneider told WIZM on Tuesday afternoon. “In the first couple years, there’s a lot of startup expenses in which can really outweigh what kind of income is coming in.”

All perfectly legal. Schneider says there are slightly different rules in place for full-time real estate people like Donald Trump but the biggest difference is just the size of the loss.

The leaked tax return Saturday by the New York Times showed Trump with a $916 million loss apparently suffered in his real estate holdings in 1995. Schneider says the biggest he’s seen in his practice is $300,000.   

“Those losses can either be carried back to offset prior year’s liabilities or they can forgo those and carry them forward into future years,” Schneider said.

Something Trump could have done for 18 years after the fact.

The reasoning for the offset was likely meant by Congress to help businesses deal with bad years or early years when it comes to a startup.

“If someone has a down year and still has some tax obligations that they would have to pay, obviously that’s going to hurt them even more than what the business loss would be,” Schneider said. “And the government knows when you start a small business the first years are always the toughest.”