New York’s hometown real estate mogul is manipulating the tax code to save a huge amount of money. No, it’s not President Trump. It’s Mayor Bill de Blasio — showing how a complicated federal tax system benefits a key constituency that styles itself as middle-class.
This week, de Blasio released his tax return, along with a dose of self-righteousness. “For us, tax time is a moment of gratitude,” the mayor and his wife, Chirlane McCray, wrote. “We are grateful to live in this country, and do our part. We are grateful to have a home — even if we don’t live in it right now — and a steady source of income” to pay taxes for “education, health care and other key areas” that Trump wants to cut to pay for a “massive tax cut to the wealthy.”
We should, in turn, be grateful de Blasio released his returns. The documents are instructive.
Strip away de Blasio’s everyman talk about “steady income” and a home, and you have an affluent property owner who aggressively and creatively minimizes his taxes.
No, de Blasio isn’t superrich — but he’s doing well. He reported $220,651 in earnings — four times what the Census says is the city’s average of $53,000 in household income. He paid $37,757 in federal taxes — about 17 percent of his total income.
But the mayor and his wife also avoided paying thousands of dollars by making a byzantine tax code work for them. In addition to his reported income, virtually all of it from his salary, the mayor reaped $106,000 from rents at two houses his family owns in Brooklyn.
But de Blasio and McCray didn’t pay taxes on any of this cash. Why?
A big reason is the mortgage-interest deduction, worth $61,219. Contrary to the de Blasios’ prim statement about being grateful to have a “home,” the mayor and his wife don’t have a Brooklyn home at the moment, but run an apartment-rental business while they live in Gracie Mansion. That’s admirably entrepreneurial, and paying the interest on business debt is a real cash expense.
But the mayor also avoids taxes by constructing a paper loss. The de Blasios took a $26,970 “expense” for “depreciation” of their houses. That, plus much smaller expenses, left the first couple with a $6,247 loss on renting out the apartments, meaning they don’t have to pay taxes.
But did they really lose money?
The IRS sets rules for taking deductions on house rentals. You can’t depreciate your land, because “land generally does not wear out.” On the other hand, if you buy a dishwasher, you can gradually depreciate that.
That seems straightforward. But properties come with all kinds of wasting assets, from “shrubbery” to pipes. It’s impossible to estimate how much a previous owner paid for each item, how much they’re worth today and how long they’ll last.
De Blasio won’t let the public see how his accountant arrived at his depreciation figure. We just know that for each year he’s been in office, his properties have…