# Reasons to do Rentals and Calculating Tax benefits of a rental?

5 Replies

I just bought my first home property last year, so i'm very new to the real estate world. I've done some hard money loans which have been great and yield around 8-10% interest. I've been toying with the idea of getting into rentals as some more supplemental income, and although I've struggled with the math as far as justification, i believe the main reasons folks here by rentals (please correct if I'm wrong) are:

• Cashflow (although I've seen people do deals eg on Roofstock for only \$100-200/mo) + appreciation (when sold) + taxes

So assuming I'm correct there, then the potential tax benefits are 30% of the reason to do rentals. Then my question is, does anyone know of a calculator or spreadsheet which helps you quantify how much for a particular rental you will save on taxes? Eg., if you're in the 28% tax bracket, the property taxes on 100k property, depreciation value, etc then you would have XXXX additional deduction for potential \$\$\$\$ savings on your taxes.

I googled, and searched the forums and looked the BP calculators and as far as I could tell i could not find one. Thanks in advance!

You're not going to find a calculator that gives you the exact numbers you're looking for. The reason for this is that there are too many variables that affect your taxable income, your effective tax rate and your actual tax bill. Without knowing your entire financial situation and looking at your past and upcoming tax returns, it's unrealistic to calculate this number exactly.

Also keep in mind, that cash flow will be taxed, so that will potentially increase your tax liability.

Expenses can only be written off against any income from the property itself. You can not reduce any other income tax you owe.

Originally posted by @Thomas S. :

Expenses can only be written off against any income from the property itself. You can not reduce any other income tax you owe.

Oh, so it can't reduce your current tax bill, but it can be used to offset profits you may have generated. Can you carry losses forward as well?

Thanks!

@Michael Garcen You can carry forward losses. Owning is an investment, being a hard money lender is a job. Nothing wrong with either thing but it's like comparing apples to oranges.

Owning is a job as well, not a passive investment.

I believe it is more like comparing Granny Smith to Mackintosh.

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