Personal Finance

Trump's 1040 only scratches the surface. These forms have the real story

If you really want to understand President Donald Trump's finances, the first two pages of his federal income tax return isn't the best place to look.

That's because his real details — and those of most other filers — can likely be found in the additional schedules tax preparers use to figure out deductions and report interest and supplemental income.

MSNBC's Rachel Maddow unveiled Trump's 2005 federal income tax return on Tuesday night. Investigative reporter David Cay Johnston said he obtained the two-page Form 1040 unsolicited and in the mail and shared it on Maddow's show. In a statement that evening, the White House confirmed the taxes the president paid, as well as his income.

Trump's Form 1040 revealed that he paid $38 million in taxes that year and reported more than $150 million in income. The return also lists a $103 million write-down.

Accountants said there is little to glean from this — and anyone else's — 1040. This form doesn't shed much light on the sources of income and the deductions taken.

"A two-page 1040 is only part of the story," said Tiffany Couch, a CPA and founder of Acuity Forensics in Vancouver, Washington.

"It's a high-level summary of taxable income sources that an individual or a married couple must report," she said. "There are many supporting schedules to a 1040 that will tell you more of the story."

These forms are better to sniff out the intricacies of someone's income:

Itemized deductions

Line 40 on the 1040 will state the exact dollar amount of itemized deductions a taxpayer claims. Trump's 2005 return lists $17 million in this space.

Deductions lower your taxable income based on your federal income tax bracket.

But if you want to get the nitty-gritty on the nature of these itemized deductions, dig up Schedule A.

This form sheds light on state, real estate and property taxes paid, medical expenses and interest paid on home mortgages.

It's no secret that well-to-do filers can lower their tax burden by giving to charity, so look for a dollar amount on that here.

"You list charitable deductions on Schedule A, but that's where people also tend to get aggressive and overemphasize what they give," said Gavin Morrissey, managing partner at Financial Strategy Associates in Needham, Massachusetts.

Real estate income

Let's say you happen to be a real estate magnate and a large chunk of your income comes from the properties you own. Schedule E is where someone can learn more about your holdings, be they residential, vacation or commercial.

Areas to pay attention to include line 3: rental income. Also, take a look at line 1b, which identifies the type of property.

Keep a close eye on depreciation, which you can find on line 18. Depreciation is a tax deduction you can take each year to recover the cost of your real estate as you use it.

"It's important because it gives you an idea of what was paid for the property," said Tim Steffen, director of financial planning at Robert W. Baird & Co. "The bigger the depreciation, the more they paid for it."

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Schedule E is also important because it details income a filer received from a partnership. Here, you'd only see what's taxable to the taxpayer, and you'll get the name of the entity and the amount of income paid out to him or her.

"If you're an owner or a member of a partnership, the earnings from those businesses will come to you on a Schedule K-1," said Couch. "All of the income from the K-1 is reported on Schedule E."

Be aware that if the filer owns a fractional interest in the property, you only see income that's attributable to his share.

Interest and dividends

Look to lines 8a and 9a on the 1040 for information on taxable interest and ordinary dividends. But if you want to delve into where a given taxpayer keeps his or her money, find that filer's Schedule B.

"As a forensic accountant, I want to know where someone banks," said Couch.

On this form, you'll see where some of these interest- and dividend-paying investments are held, but you won't get any details on what exactly the taxpayer has invested in.

What if you sold an asset? Schedule D will tell you more about the gains and losses stemming from the sale.

Side hustles

If you're running a sole proprietorship out of your home, you have to report the income to the tax authorities.

Schedule C will detail the net profit and the loss based on the small business you're operating. You would also see a breakdown of the expenses related to running the enterprise.

"If someone dropped their 1040 on the street, and you're figuring out the wages they have from 1099 contractor work, you'd want Schedule C," said Morrissey.

"That's a big one from a business reporting standpoint," he said.