Why Donald Trump Doesn’t Pay Tax
Depreciation is a deduction available due to the wear and tear of a building’s structure, its fixtures and fittings over time. It is considered a non-cash deduction, meaning investors do not need to spend any money to be able to claim it.
Donald Trump and other real estate moguls operating a commercial property pays very little tax on their respective businesses simply because of depreciation laws that allows these businesses to conduct depreciation on their commercial properties.
These hotels could be grossing billions of dollars on a yearly bases, but if it’s claimed on their income statement that the assets are depreciating as much as the income the properties are generating then no gains is recorded hence no taxes are required.
Generally, Taxes are required and paid only on net income not gross income.
There are several advantages of becoming a commercial real estate professional such as tax write offs, depreciation etc.. A guy like trump who experienced a lot of losses on his properties in New Jersey (Taj Mahal) and Golf courses he built all over the country; legally he wouldn’t be paying a lot of taxes because 100% of Zero is Zero!! Also, taking into account that many hotels during the corona covid-19 are running on less than 50% capacity due to covid-19, lots of these businesses are losing money everyday and most of them might go bankrupt without govt bailout.
Depreciation is not limited to hotels, anybody could take advantage of this tax lopehole by simply buying more commercial assets.
However, land known not to depreciate in value, it only appreciate with time. A portfolio of pure land will not be able to take advantage of the depreciation income tax loopholes simply because land does not depreciate.
However, if the land is non-serviced farm land there is a tax incentive for farmlands. Since real estate is local, a local realtor in your city will be able to advice on tax incentives on farmlands ( tax rate is different for every city, province, state or country).
Like I mentioned earlier, Serviced prime land cannot be depreciated, it’s is when a commercial structure is erected on the land that the depreciation kicks in. In essence, what is depreciating is the building not the land. For example, a lifespan of a typical Las Vegas Hotel is less than 15 years, these hotels on the Las Vegas strip are often depreciated and demolished and another newer hotel is built on the same land or location.