Program to Calculate Tax Savings in Deal Analyses

Los Angeles County, California
Tax, SDIRAs & Cost Segregation
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Program to Calculate Tax Savings in Deal Analyses

Kelsey Vander MeulenPro Member
Member since 2024 · 22 posts · 6 votes

Hi all, 

My husband and I are high-income earners in a high income tax state (California). We currently own a SFR in Texas, but we are looking to purchase another SFR in Arizona. Given our tax bracket, including tax savings when analyzing various real estate deals is critical in determining our ROI. Does anyone have an excel program or software that they recommend that includes Schedule E data to show you the potential tax savings on various real estate deals?

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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
2y
Quote from @Kelsey Vander Meulen:

Given our tax bracket, including tax savings when analyzing various real estate deals is critical in determining our ROI.

No, it is not. What is critical is to understand that two high-income earners cannot reduce their taxes by investing in traditional rentals. Maybe in short-term rentals, under the right business model. 
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  • Account Closed
    Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
    2y
    Quote from @Kelsey Vander Meulen:

    Hi all, 

    My husband and I are high-income earners in a high income tax state (California). We currently own a SFR in Texas, but we are looking to purchase another SFR in Arizona. Given our tax bracket, including tax savings when analyzing various real estate deals is critical in determining our ROI. Does anyone have an excel program or software that they recommend that includes Schedule E data to show you the potential tax savings on various real estate deals?


     Hey Kelsey, 

    Unfortunately, it's not that simple, since you need to consider your AGI (adjusted gross income) to get the real savings here and that requires doing your taxes quite literally from start to finish. You can guess based on last year and add or subtract any changes, but that too comes with issues. If your looking at a deal, I would highly encourage you to make sure it makes sense WITHOUT the tax benefits. And then treat the tax benefits as a nice cherry on top. Best of luck in your SFR journey!

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  • Kelsey Vander MeulenPro Member
    OP
    Member since 2024 · 22 posts · 6 votes
    2y

    Hi Zach,

    Thank you for your help anyways :).

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    2y
    Quote from @Kelsey Vander Meulen:

    Given our tax bracket, including tax savings when analyzing various real estate deals is critical in determining our ROI.

    No, it is not. What is critical is to understand that two high-income earners cannot reduce their taxes by investing in traditional rentals. Maybe in short-term rentals, under the right business model. 
    1Reply
  • Kelsey Vander MeulenPro Member
    OP
    Member since 2024 · 22 posts · 6 votes
    2y

    I should have mentioned that we are planning to make the SFR a short-term rental...What tax forms would we use for a short-term rental? What are the general tax implications? I know that the tax breaks with a STR are generally much more generous...

    Thank you.

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    2y
    Quote from @Kelsey Vander Meulen:

    I should have mentioned that we are planning to make the SFR a short-term rental...What tax forms would we use for a short-term rental? What are the general tax implications? I know that the tax breaks with a STR are generally much more generous...

    here is the answer:  
    https://www.biggerpockets.com/forums/51/topics/1122635-the-s...
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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    There isin't a simple program for everyone to use bcause it depends on several factors

    1) If you have a loss, will the loss be considered passive or active?
    2) Each taxpayer has their own tax rates to consider - Federal and state tax rates.
    When determining state tax rates, they need to potentially calculate the state tax rate of the resident state and the state where the property is located in.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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  • Kelsey Vander MeulenPro Member
    OP
    Member since 2024 · 22 posts · 6 votes
    2y

    Thanks for all your help guys!

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