Cash flow after income tax for rental property

5 Replies

Hi all - does anyone use cash-flow after income tax to evaluate the attractiveness of a property? I projected positive cash flow on a prospective property... until I added my expected income taxes, which turn the number red (primarily because principal payment is not deductible).

Curious to see how folks think about this.

Typically all of the write-offs on a residential rental property negate any income tax you would have to pay. So no one really counts income tax as an expense but you don't have to pay much, if any, of it. Are you familiar with the tax benefits of rentals and how that all works?

Run a search on depreciation. Typically that offsets the income tax. Also, get to understand depreciation recapture when you sell. 

@Igor Aka

Igor, here is a link to an IRS publication discussing residential rental. As a tax accountant it’s great reading to me, but I’m sure it could be somewhat boring for others.

Consider reading through and you’ll likely come up with plenty of tax questions. Happy reading!!!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you