Sanders Aims to Close Tax Loopholes Used by Trump

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Sen. Bernie Sanders (I-Vt.) recently announced that he plans to introduce a bill during the next session of Congress that he claims will close the loopholes Donald Trump reportedly could have used to avoid paying federal taxes for 18 years.

“Special tax breaks and loopholes in a corrupt tax code enable billionaires and powerful corporations to avoid paying their fair share of taxes while sticking the burden on the middle class,” Sanders said in a press release. “It’s time to create a tax system which is fair and which asks the wealthy and powerful to start paying their fair share of taxes.”

What Are the Loopholes?

According to the press release, there are four main “loopholes” Sen. Sanders is looking to close — exemption for real estate from passive loss rules (section 469), exemption for real estate from at-risk rules (section 465), like-kind exchanges (section 1031), and debt and depreciation — as these tax breaks are likely what “made it easier for [Trump] to claim losses of $916 million in the 1990s and avoid paying income taxes in subsequent years,” according to the release.

“Maybe he has a book about his plans for each, but it sounds like he’s just saying just get rid of these,” Jared R. Callister, an attorney at Fishman Larsen & Callister in Fresno, California, who focuses on real estate transactions and taxations, said. “I don’t see the benefit of that. Maybe he can modify the rules … to make it a middle ground.”

What Does This All Mean?

Callister broke down each of the items Sanders is hoping to change when Congress meets again in 2017, starting with the passive loss rule. He said this allows real estate developers to offset their losses with income they earn from other sources. In Trump’s case, that would mean he could balance out what he loses investing in real estate with the income he gets from non-real estate projects, like book royalties, TV appearances or endorsements.

“I think there is an argument to re-examine if we want professional real estate developers to benefit the way that they do,” Callister said.

In terms of real estate exemptions for at-risk rules, Callister said he thinks Sanders has “some good arguments there,” as this currently allows real estate investors to claim losses that are more than what they invested.

The like-kind exchanges law allows people to defer paying taxes on money made from property sales, assuming the person uses the money to purchase another property, Callister explained.

“The reason Congress put that in place is because they don’t want people to be hesitant to buy and sell property,” Callister said. “They think property changing hands is better than forcing someone to hold onto it because they don’t want to pay the taxes.”

He did note that if this law is changed, it could hurt farmers, as “you’d have farmers stuck holding land they don’t really want because they don’t want to pay the tax, but as long as they buy another real property, they get to defer the tax. It’s a delay and deferral of [paying a] tax, not avoidance of it.”

The debt and depreciation regulation is the item Callister said is baffling to him.

“I don’t know why [Sanders] would challenge that,” Callister said. “It doesn’t make any sense to me. If you borrow money and pay interest on the debt, I don’t know why you wouldn’t be able to deduct your interest.”

However, Callister said that the thing most notable about Sanders’ announcement is the “glaring omission” of the Net Operating Losses rule that predominately helped Trump get out of paying a large portion of taxes.

Representatives from Sen. Sander’s team did not immediately respond to Credit.com’s request for comment.

Paying Your Taxes

We are still several months away from Tax Day, but that doesn’t mean you shouldn’t be thinking about what you may have to pay. It is a good idea to have some money set aside just in case you do end up owing the IRS come April 15. Owing on your taxes doesn’t necessarily affect your credit, but how you choose to pay them might. For example, if you take out a personal loan or charge the bill to your credit card, these things will most likely be reported to the credit bureaus. You can see how your credit is being affected by these and other financial habits by viewing a snapshot of your credit report for free, updated every 14 days, on Credit.com.

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The Worst Vote for Your Home Value: Trump or Sanders, Economists Say

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In somewhat ironic news, real-estate-magnate-turned-presidential-hopeful Donald Trump would be bad for the housing market if he won the election, according to a new report. The same goes for a potential President Bernie Sanders.

Zillow, a real estate company, and Pulsenomics, an economics research firm, surveyed more than 100 housing experts on how the presidential candidates would affect the housing market if elected. The consensus was that a President Trump or President Sanders would negatively impact home value forecasts, housing finance reform and the U.S. economic outlook overall.

Pulsenomics questioned 107 experts between April 25 and May 5, a period in which Sen. Ted Cruz (R-Texas) and Gov. John Kasich (R-Ohio) suspended their campaigns for the White House. Still, the economists considered what both candidates could have done for the housing market and came to the conclusion that, had either been elected president, Cruz would have had a negative effect and Kasich a positive one.

With Kasich, economists’ most favored candidate, out of the race, the presidential hopeful with the next-best economic outlook was Hillary Clinton. The panelists generally viewed a Clinton presidency as one that would positively affect forecasted home values and housing finance reform, and have a neutral impact on the economy overall.

The report didn’t offer much detail on the reasons for the economists’ assessments, nor did it explain how the economists were selected for the survey.

“The results from this survey show us that, from these economists’ standpoint, the more centrist candidates from either party would be best for the economy and housing market,” Terry Loebs, Pulsenomics founder, said in a press release. “Respondents saw the more polarizing political leanings of Donald Trump and Sen. Sanders as having a negative effect.”

Some panelists said Trump’s “inconsistency on policy, unpredictability as a candidate and lack of political experience” drove them to say he’d negatively impact the housing market as president. Panelists looked even less favorably on Sanders, whom 59% believed would somewhat or very negatively influence home value forecasts. (Forty-nine percent said the same of Trump, and 29% felt that way about Clinton.)

Election years always bring on feelings of uncertainty, which is why homeowners should keep tabs on their estimated home value, no matter who’s running the country. Home value can affect your property tax bill, which in turn can impact your housing budget, your ability to pay back your mortgage, and your credit score. (You can view your free credit report summary, updated monthly, on Credit.com. And, if your credit is in rough shape, you can potentially improve your score by disputing errors on your credit report, paying down high credit card balances and limiting inquiries in the short-term.)

Property value is also important to monitor if you consider selling your home — and plan a move to Canada in November.

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