Is this correct?

[Peter Matus]

Hi guys,

Quick question..I have W2 job and last year did around 85K gross from my job..Also in October last year I bought investment/rental property with 30% down..today my tax person told me-I owe the government $ 3,5K ...please keep in your mind compare to my coworkers I am paying crazy amount taxes during the year...I know each case is different and unique but is this even possible? I never in past have to pay taxes,always got little return...

[Jason Wray]

Peter,

That does not sound accurate based on having a Schedule E and being able to take those deductions as well as other standards.

As an investor it's not a bad thing to show more gross income which usually allows you to buy more properties with more income and a lower DTI. When you show more income you do in some cases owe more to Uncle Sam, if you are not utilizing the Max deductions correctly.

I would ask your CPA and maybe even get a second opinion on if he/she is accounting for all 365 days, taxes, mortgage interest, repairs, depreciation, vacancy, closing costs.

There is always a way to 'Zero" out and not owe in most cases.

[Kelly O'Keefe]

Hi @Peter Matus

I don't have all of the information on your specific situation but that does sound high. I would reexamine your transactions as there is probably more expenses available to you that can reduce your taxes. If you materially participated in the rental this could be another strategy to examine. I would also be curious if it was a big chain tax professional or your personal CPA? 

Another factor that could create the amount owed is if your employer is not withholding enough in taxes and it was not caught until tax season. Your tax pro should be able to tell you exactly why you owe the amount and where the taxes are coming from.

[Ash Hegde]

That does seem unlikely unless you changed your withholding to take less from your paycheck. The other possibility is that your rental did REALLY well - it would probably have to be a home run short term rental to generate that much taxable income in that short of a time frame. 

[Bruce D. Kowal]

Buy Turbo Tax and do it yourself.  That is your second opinion.  TT has AI this year.  Might help.

[Account Closed]

Hey @Peter Matus, 

That does sound high... I would advise you to connect with someone who specializes in real estate who can explain why you owe that much and what can be done about it. 

[Basit Siddiqi]

If everything else is the same and the only new change is buying a rental, I have a feeling that the return is done incorrectly.

I am also surprised that a rental purchased recently with high purchase prices and high interest rates would generate positive taxable rental income.

[Eric Gerakos]

You need a new “tax person.”

[Sean O'Keefe]

Can I say "maybe"?