How to figure out Marginal Tax Rate to calculate Tax Savings?

[Edgar Garnys]

Does anyone know how to calculate the marginal tax rate? I want to take (depreciation + interest paid) × marginal tax rate to calculate yearly tax savings. The template I'm using has 51% currently plugged in but I feel that may be too high. Any thoughts?

My goal is then to take the tax savings value and divide it by the down payment on a rental property to calculate the annual ROI % from tax savings. I would appreciate any help as I scoured the internet and did not find a straightforward answer!

[Chris Davidson]

@Edgar Garnys you need to break down your income and taxes. For easy math say you make 100k, and the tax brackets are 0-20k at 0% 20-50k at 10% and 50-100k at 20%.

With that you would pay zero taxes on your first 20k, 10% on 30k (50k down to 20K) or 3k, and 20% on 50k (100k down to 50k) or 10k. So you pay 13k on 100k your marginal tax rate is 13% as that is 13k (tax bill)/100k (income).

You can really go into the weeds on this one but would challenge you with the question of why? Because is it helping you get a better deal or is it keeping you from taking action by analysis by paralysis? No matter what way you cut it if you make money on the deal you will be in a better position than not doing a deal and making no money.

Check out IRR or internal rate of return as that would be much more helpful if you want to dive that deep into the numbers and will be the true rate of return on the investment vs just one aspect related to taxes.