All Forum Posts by: Marek J.

Quote from @Account Closed:

Quote from @Marek J.:

High w2 earner and was wondering what would be savings i make on tax regarding rental income after all tax write off?

for example I’d need to make 18 at work to equal 9k rental income.

So I calculated that with real estate I’m saving 35% fed 7.75% IL tax 7.25 Social security tax and 0.9% niit tax.

50.6% savings ? So 

I have to make 50.6% more at work to equal what I’d keep with real estate. Just checking my math.

This is obviously after all expense , depreciation, cost set, property tax write offs, 20% etc.

my question is are my assumptions correct? 

 I think i know what you are trying to do, but this isolation exercise isn't giving you the answer you want. I think your trying to figure out your real after tax income on w2 earnings vs rental income earnings, but for that you need to consider all benefits of real estate and benefits of w2 which has much more variables then just this 

Yep was just checking rough numbers and logic behind calculation. 

Quote from @Account Closed:

1. Your federal income tax rate is 35%. This means that for every $1 of rental income you generate, you save $0.35 in federal income tax.
2. You mentioned an Illinois state income tax rate of 7.75%. Similar to federal tax, for every $1 of rental income, you save $0.0775 in state income tax.
3. The Social Security tax rate is 6.2% for employees. However, as a high earner, you might be subject to the Social Security tax wage base limit, which is $147,000 (as of 2022). Once your income exceeds this limit, you no longer pay Social Security tax on additional income. Therefore, if your W-2 income exceeds this threshold, you wouldn't save on Social Security tax for rental income.
4. The Medicare tax rate is 1.45% for employees. Additionally, high-income earners are subject to the Net Investment Income Tax (NIIT) of 3.8% on certain investment income, including rental income. So, your combined Medicare and NIIT tax rate would be 5.3%.
5. To calculate the total tax savings on rental income, you would add up the savings from federal and state income tax, and Medicare/NIIT tax:
6. Total Tax Savings = Federal Tax Savings + State Tax Savings + Medicare/NIIT Tax Saving
7. Given your tax rates, you can calculate the total savings. However, remember to consider deductions, depreciation, and other tax benefits associated with rental income. 

 Thank you so much so basically when I add up the % using what you said above savings is 49.6% which means I have to earn that much MORE w2 income equal that in rental income.

Roughly 18k w2 income tax (savings of not paid on rental 49.6%) would be the $9000 in rental income ? Correct 

What equivalent w2 income I need to make to keep $9000 after tax rental income?

so if I’m in 35% fed and 7.8% state and 7.5% social security that I pay as an employee I DONT need to pay that on rental income so wouldn’t I need to make that much more to keep $9000 after tax from w2 ? 

High w2 earner and was wondering what would be savings i make on tax regarding rental income after all tax write off?

for example I’d need to make 18 at work to equal 9k rental income.

So I calculated that with real estate I’m saving 35% fed 7.75% IL tax 7.25 Social security tax and 0.9% niit tax.

50.6% savings ? So 

I have to make 50.6% more at work to equal what I’d keep with real estate. Just checking my math.

This is obviously after all expense , depreciation, cost set, property tax write offs, 20% etc.

my question is are my assumptions correct? 

Hello. I am considering this strategy and I was wondering what you guys think of it. I been saving up to buy my first deal. But with few deals in the Chicago market I was wondering whether it would be good to invest some of my savings into stocks? There are some great opportunities in the stock market.

I would invest 20% of my savings into the market and keep 80% of the savings in a high yield money market for when a RE Deal does come up.

This idea is that 20% that I would invest (buy and hold in the stock market) can double in 2-3 years as companies recover, at which point I sell that position and use it as a down payment on another real estate deal.

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Long term would it make sense to take 20% of my income and invest into the market with the hopes of doubling the money 2-3 years then pulling it out and putting into real real estate.

Obviously I would keep saving the other 80% of my income from my job. I have a good savings rate and low overhead.

Thank you.

Originally posted by @Natalie Kolodij:

Originally posted by @Michael King:

@Natalie Kolodij @Basit Siddiqi

You mention $150K threshold on W2. I make more than that on my W2, but my wife makes nothing (stay at home mom) but we file married filing jointly. Is there a higher threshold in that instance. 

Sorry @Marek J. I didn't meant to hijack your thread.

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Hello, so basically to do this I have to be a real estate professional ? Or have my wife be Re Professional. How would it look in that case ?

 Nope still $150k unfortunately 

But if your wife doesn't work and she's who manages your properties talk to your tax professional about potentially qualifying for RE professional status with the IRS. 

Originally posted by @Andrew Hogan:

Like Natalie and Basit pointed out, unless you qualify as a full-time real estate professional, you can't offset ordinary income with passive losses. 

However, once you're in the game for a while, you'll begin to see better tax shelter. 
For example, whenever we exit an asset, the investors that are in for the long haul will reinvest their proceeds into the next acquisition whose paper losses typically offset the former gains and thus they are able to grow their wealth buckets at a faster rate - tax efficiently. (sort of like a 1031 but better)

Hope that helps 

 Hello what I meant is when for example make $150,000 at my W2 job, could i live on bare minimum and invest let say $100,000 into real estate per year and only be taxed on $50,000.   $150,000- 100,000 - $50,000 left over to live on. Now obviously my regular job taxes me each pay period but maybe id get a refund now since i Invested in real estate? Funding my business so I never realized the profit from my job, nor I consumed it, it was invested.

Hello, I like my w2 job. I also want to invest in multi family real estate. How would keeping my normal job affect my taxes? I want to essentially invest all money earned from my regular job and invest into real estate. As real estate is a business would this reduce my tax liability on the regular job? They always talk on the podcast how you invest in your business.

Would buying real estate and investing in my real estate reduce my tax liability on the earned income? Essentially as I invest the money from my day job I don’t have it so I shouldn’t be taxed on it.

Any ideas would be appreciated.

Thank you

@Jeff Burdick Hello, I was want to invest locally most likely around Midway airport. Archer heights, Clearing, Garfield Ridge , West Elsdon. Any recommendations on where to start ? Should I stay away from Summit ? I seen some lower prices there. What would be a good price for a triplex ?

Hello, my name is Marek. I am a long time member first time poster. I been interested in Multi Family real estate for a while. For the past year I been reading many books and articles, and listening to biggerpockets podcasts. My long term plan is to build a real estate portfolio of multi family units in Chicago. I really like triplexes and larger units like six units. I would ultimately want to add one investment property building per year, and specialize in 3 to 6 unit products to build a large portfolio of those products in the local Chicago market around Midway airport and the city itself. The first step I would like to do is owner occupy a triplex. I live on the southside so I am planing on investing close to my area.  

Thank you