What Small Business Owners Can Learn from President Trump’s 2020 Tax Return

The Big Picture: Trump’s 2020 Numbers

Here are a few highlights from his return:

• Total income: $4.6 million, a net loss.
• Deductions: About $915,000, primarily related to investment expenses.
• Tax liability: Around $272,000, from self-employment and household employee taxes.
• Refund: Trump had overpaid nearly $13.7 million and requested $5.4 million back, carrying the rest forward to the next year.

What stands out here is how losses from his businesses lowered his overall taxable income, even though he had other sources of income like interest and investments.

Lesson 1: Business Losses Are Not Always a Bad Thing

Trump reported a negative adjusted gross income (AGI), meaning his business losses outweighed his income. While that number looks unusual, it is not an automatic red flag.

For small business owners, this means:

• Reporting a loss is not a problem if it is backed by accurate records.
• The IRS understands that businesses, especially in industries like restaurants, retail, or real estate, do not always show profits every year.
• Losses can often be used to reduce taxes in future profitable years.

So, if your business shows a loss, do not panic and focus on documenting everything properly.

Lesson 2: Do not Miss Out on Out-of-Pocket Expenses

A notable detail in Trump’s return is his deduction of supplemental expenses which he personally covered for his partnerships and businesses.

Small business owners should pay attention here:

• If you pay for supplies, travel, or other business costs without reimbursement, you may still be able to deduct them.
• Keep careful records of these expenses so you do not miss out.
• Always separate personal and business spending to avoid confusion.

Even small amounts add up, and these deductions can reduce your taxable income.

Lesson 3: Itemized Deductions Still Matter

Many people now take the standard deduction, but Trump’s return shows itemizing can still make sense. His deductions were almost $1 million, mostly related to investment expenses.

For small business owners, the message is:

• Do not assume the standard deduction is always best.
• If you pay interest on loans used for business or investments, those costs may be deductible.
• Always compare both options, standard vs. itemized, to see which saves you more.

Lesson 4: Keep Your Business Activities Organized

Trump had multiple small business ventures listed separately, many with minimal descriptions and consistent losses. While it worked for him, it may not be the best approach for most small businesses.

Here is what you can do instead:

• Avoid having too many separate “side businesses” without a clear plan for profit.
• Consider combining activities under one LLC or S-Corp for clarity and structure.
• The IRS may treat a money-losing “business” as a hobby if it never shows profit, so be clear about your business intent.

Lesson 5: Be Smart About Refunds and Carryovers

Instead of taking back his entire overpayment, Trump carried $8 million forward to the next year and requested $5.4 million as a refund.

This can be a useful tactic for small business owners too:

• If you overpay, you can apply the extra toward next year’s taxes instead of waiting for a refund check.
• Carrying forward credits or payments can make future tax payments easier to manage.

Lesson 6: Stay Compliant with Reporting

Trump’s return included a number of disclosures about foreign investments. While most small businesses do not have this level of reporting, the lesson is simple:

• If you own investments, assets, or accounts outside of the U.S., you must report them.
• The penalties for missing these disclosures can be large, even if no extra tax is owed.

Compliance is just as important as lowering your tax bill.