President Donald Trump’s proposal to preserve the interest deduction for businesses amid a broad effort to reform the country’s tax code could save millions of dollars for companies controlled by his family, a new report claims.
The Trump Organization [TRDataCustom] and its affiliates pay more than $20 million each year in interest on their debts, according to an analysis of financial disclosures and other public records by the Wall Street Journal.
Under the current tax law, borrowers can deduct those interest payments from their total taxable income, but Congressional Republicans have proposed ending the deduction for businesses.
If that were to happen, the Trump Organization’s taxable income could grow by more than $20 million. Taxed at a 40 percent personal income rate, that would work out to roughly $8 million in potential additional tax liability.
Trump’s plan would only limit interest deductions for some manufacturers.
It’s unclear, however, just how tax reform would affect Trump’s taxes because he never released his tax returns. Earlier this month he said he transferred control of his businesses to a trust that will be controlled by his two sons and a Trump Organization executive, though he did not identify the beneficiaries of the trust or say whether he will resume control of his business empire when he leaves office.
“There’s a clear conflict between his personal finances and his presidential role,” said New York University tax law professor Daniel Shaviro. “His own tax policies would be good for his financial interests.”
Congress’ tax plan would also do away with the use of depreciation. Developers would instead be able to write off the cost of buying property against income during the purchase year. [WSJ] – Rich Bockmann