How do you calculate taxes?

Question

Hi all I was just wondering when you do your analysis, how do you calculate taxes exactly? I understand in the calculation there is a tax tab and I see that people input there tax from there county assessors office. Now I'm talking about rentals when I do this, but don't you also have to include state as well as federal taxes? I'll use an example

Purchase Price: 100,000

Rental Income: 1,0000

Tax (From County Assesor): 100

Net Income: 900

Now I'm using a very basic analysis here for our example, lets say we make $9,000 for the year, don't we have to tax the $9000 with state as well as federal taxes?

Chris Mason · Answer

EDIT - nvm misread question

Ali Boone · Answer

A couple things-

Here's just general numbers-running-

https://www.biggerpockets.com/renewsblog/2013/01/1...

And then check this out about the taxes-

https://www.biggerpockets.com/renewsblog/2016/07/0...

Hope that helps!

Dave Toelkes · Answer

The purpose of the calculator is to tell you how much monthly cash flow the property will generate using your assumptions for overhead expenses and debt service.  If you wanted to know how much state and federal income tax you would have to pay, start with your annual cash flow after debt service.

Subtract the annual depreciation and add back in the portion of the annual loan payment that goes to principal reduction.  If you have a positive number, multiply the result by your marginal tax bracket rate for federal and state taxes.

Most of us don't worry too much about federal and state income taxes because the tax is always less than our positive cash flow.  Rental property investors don't buy a property, they buy the cash flow a property will generate.  If the net cash flow is too low or even negative, then this is not a candidate for purchase.  The calculator tool is designed to help you determine whether the candidate property would be a good acquisition.