Donald Trump Tax Returns Loss Carry Forward

Donald Trump Tax Returns Loss Carry Forward

Donald Trump’s 1995 tax return has become a key talking point in the current election. Regardless of your views of Donald Trump, it is important to understand the tax code and to plan your businesses “legally,” the way he does. I do not support the candidate on his views of just about anything, but we all need a little more carry forward in our financial portfolios.

The loss carry forward method of realizing tax relief is legal and rewards entrepreneurs for risking their wealth for future growth. Think of how much more you can do with your money if you did not have to pay any tax next year? You would be about 16% to 45% wealthier based on your tax bracket and state of residency.To help business owners stay in operation, the tax code allows a special tax deduction, known as loss carry-forward, when losses occur. A loss carry-forward is nothing more than a tax deduction that can be taken in a future year.

Net Operating Loss Carry-Forward
When a business owner’s expenses exceed the sales for the year, he is eligible to take what is known as a net operating loss carry-forward. A net operating loss carry-forward allows you to write down future income tax liabilities by the amount of the loss in the current year. Losses can be accumulated if there are multiple years of loss, and can be carried forward for up to 20 years.

Capital Gain Carry-Forward
When an asset such as a stock is bought then sold for more than the purchase price, the seller earns what is known as a capital gain. If it is sold for less than the purchase price, you have what is called a capital loss, and these losses can be carried forward just like net income losses. Unlike net operating loses, there is a $3,000 annual limit to the losses that can be carried forward. Also, individuals can make use of these deductions for their capital losses.

Loss Carry-Back
Tax carry-forward allows a reduction of tax liability for future taxes, but loss carry-back allows a company to reclaim money that they have already paid in taxes. If losses were large, a company could carry back the loss for two years. If you operate a small business, you may qualify for years of carry-back.

How does this all work?

Step 1
Calculate your net operating loss. For most businesses, this will be easy; however, it is especially important to make sure you have kept nonbusiness losses separate from business losses. Nonbusiness losses are generally not allowed to be carried over to the same extent as business losses. Net operating loss can be calculated by simply subtracting business expenses from business revenues. For example, if your business earned $3,000 but lost $20,000, you would have a net operating loss of $17,000

Step 2
Calculate your allowed net operating loss carryover deduction. This deduction is limited to the extent that it would exceed your tax burden. In other words, you can’t use your net operating loss deduction to force the IRS to pay you money. For example, if you have $17,000 of net operating loss to carry over to Year 2 and your total income for Year 2 was only $4,000, you will be limited to $4,000 in carryover losses for that year and will have to wait until future years to use up more of your allowable deduction.

Step 3
List the figure you wish to use from Step 2 as a negative number under “Other Income” on Form 1040 or 1040NR to take the net operating loss deduction. For example, if you were using a $4,000 deduction, you would list “-$4,000” under “Other Income.”

Donald Trump Tax Returns Loss Carry Forward