Property Manager · Lakewood, OH · Member since 2015 · 250 posts · 258 votes
Let me preface this with I ALWAYS hire someone. I attempt to estimate my tax bill every year and I am ALWAYS wrong. I pay a CPA, I've learned my lesson.
That being said, this whole tax thing really works me up. I am always nervous that I am going to get blindsided with a giant tax bill. I save up for it but I don't know what it's going to be until the tax elves work their magic. This stalls all progress I make in the first quarter of the year because I am afraid if I buy stocks or a new property that I am going to over extend myself when my tax bill comes.
Alright, so my question is..... Is there a reliable tax estimator for someone who gets a W2 - a 1099 and has rentals?
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
10y
@Anthony R.unfortunately the majority of the tax calcs out there will produce inaccurate results for two reasons: (1) calculating your tax liability can be tough to do, especially if you are a real estate investors or a business owner as you will not see the same net income month over month and (2) the tax calcs that do work aren't tailored to your specific situation.
The key is to avoid the underpayment of estimated tax penalty. Owing at the end of the year is not a bad thing, however I understand the desire to have a semi-accurate idea of what you will owe.
So you can do one of three things:
(1) prepare a mock 1040 as you normally would as this will give you a high level of accuracy if prepared correctly;
(2) review your previous returns and determine your effective tax rate, then apply that rate to this years earnings;
(3) have a CPA do it.
I get this request all the time so I've built a template for myself that allows me to quickly estimate a client's tax liability. Perhaps I should consider selling it :)
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
10y
@Anthony R.unfortunately the majority of the tax calcs out there will produce inaccurate results for two reasons: (1) calculating your tax liability can be tough to do, especially if you are a real estate investors or a business owner as you will not see the same net income month over month and (2) the tax calcs that do work aren't tailored to your specific situation.
The key is to avoid the underpayment of estimated tax penalty. Owing at the end of the year is not a bad thing, however I understand the desire to have a semi-accurate idea of what you will owe.
So you can do one of three things:
(1) prepare a mock 1040 as you normally would as this will give you a high level of accuracy if prepared correctly;
(2) review your previous returns and determine your effective tax rate, then apply that rate to this years earnings;
(3) have a CPA do it.
I get this request all the time so I've built a template for myself that allows me to quickly estimate a client's tax liability. Perhaps I should consider selling it :)
Property Manager · Lakewood, OH · Member since 2015 · 250 posts · 258 votes
10y
Is it common to write off all of your rental income each year? I looked at last years return and filled in my new numbers and it appears that I will have a loss of 1500 over all.
That is, if I can combine both buildings into one. One building had 10,000 in repairs and the other had 3,000. So if I can combine it all together then I will have a loss. However, if I can only count expenses toward the building that earned it then I will have a profit.
Does this look right?
Income 51,000
Expenses 13828 (I included utilities here)
Depreciation 9953
Taxes 13003
Interest 9593
Insurance 6089 (most of this is pmi on one of the loans. The rest is rental property insurance)