Cash you keep in year one
$2,664After property costs, mortgage and modeled taxes.
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Tax Engine
What do you keep after taxes?
Estimate yearly cash, your return after taxes, and the tax bill when you sell.
Annualized return after taxes
6.2%Pre-tax 7.9% · tax difference -1.7 pts
Estimated tax when you sell
$36,723At the end of your 10-year hold.
How to read your return
After-tax IRR of 6.2% is acceptable but the -1.7 pts tax drag is meaningful. The depreciation shield is built on the building, not the land — a cost-segregation study accelerates it, and a land allocation on the low end of what your assessor ratio or appraisal actually supports leaves more basis to depreciate.
Your first year in cash
- Scheduled rent
- $45,600
- Cash before and after taxes
- $2,664
See every rent, cost and tax line
These layers build the year-one cash flow the 6.2% after-tax IRR above is solved from. Bars are sized against gross scheduled rent. The three tax-ledger lines — the principal add-back, depreciation, and taxable income — are marked: they change what you are taxed on, not what lands in the account, which is why the cash running total picks back up at pre-tax cash flow. Principal is added back because it is real money out but is never a deduction, so without it the rows above would not reach taxable income.
Adds to cash
Reduces cash
Subtotal / total
Gross Scheduled Rent+$45,600
every rent dollar the property is scheduled to collect in year one
Vacancy Loss−$3,192
months the unit sits empty or between tenants
Gross Effective Rent$42,408
the rent that actually lands in the account
Property Taxes−$5,000
the county bill, which the lender escrows either way
Insurance + HOA + Flood−$2,000
hazard insurance plus HOA dues and any flood policy
Property Management−$3,648
what a manager charges to run the unit, whether or not you hire one
Maintenance & Repairs−$3,648
the running cost of keeping the unit rentable
Net Operating Income (NOI)$28,112
what the property earns before the mortgage — the number a buyer prices off
Interest−$22,210
the lender's share of the payment; deductible
Principal−$3,238
the part of the payment that buys down the loan — cash out, equity in
Pre-Tax Cash Flow$2,664
what is left after the mortgage, before the IRS
Principal Add-Back (tax ledger, not cash)+$3,238
the principal you just paid comes back: it left the account, but the IRS does not let you deduct it, so the tax ledger has to put it back
Depreciation Deduction (tax ledger, not cash)−$11,848
depreciation shield (paper losses that offset taxable rent) — a deduction, not a payment
Taxable Income (tax ledger, not cash)−$5,946
the figure the IRS taxes, which is not the same as your cash flow
Federal Tax+$0
federal income tax on the rental, after passive-loss rules
State Tax+$0
state income tax at your state's rate
After-Tax Cash Flow$2,664
what you actually keep from year one
Tax deductions and sale-tax breakdown
Tax calculation details
Each line is a component of the calculation, not a verdict on its own — the after-tax IRR above is the number that judges the deal. The difference between pre-tax and after-tax IRR is your total tax drag.
Depreciation deduction, whole hold — the total amount of building value you write off over the years you own it. This is the deduction, not the cash you save: your saving is roughly this figure times your tax rate.$123,636
Depreciation shield as % of NOI — annual depreciation deduction divided by net operating income44.0%
Effective tax rate (combined federal + state) — blended rate across all operating years0.0%
Total tax on exit — depreciation recapture + capital gains tax owed when you sell$36,723
§1250 recapture rate — the tax rate on depreciation you claimed (capped at 25%)23.5%
Long-term capital gains rate — applied to the remaining profit above your basis18.8%
NIIT (3.8% net investment income tax) — applies if MAGI exceeds $200K single / $250K jointYes — adds 3.8% to investment income
Compare cash flow year by year
Year-by-year cash flow — before and after taxes
Pre-Tax = net operating income minus debt service. Dep. = depreciation deduction (reduces your taxable income each year). Tax Shield = value of dep. deduction (dep. × effective tax rate). Fed+St Tax = federal plus state tax owed. After-Tax = what you actually keep. Green = positive; red = negative cash flow that year.
| Yr | Pre-Tax | Dep. | Tax Shield | Fed+St Tax | After-Tax |
|---|---|---|---|---|---|
| 1 | $2,664 | $11,848 | $0 | $0 | $2,664 |
| 2 | $3,226 | $12,364 | $0 | $0 | $3,226 |
| 3 | $3,800 | $12,364 | $0 | $0 | $3,800 |
| 4 | $4,385 | $12,364 | $0 | $0 | $4,385 |
| 5 | $4,982 | $12,364 | $0 | $0 | $4,982 |
| 6 | $5,590 | $12,364 | $0 | $0 | $5,590 |
| 7 | $6,211 | $12,364 | $0 | $0 | $6,211 |
| 8 | $6,844 | $12,364 | $0 | $0 | $6,844 |
| 9 | $7,490 | $12,364 | $0 | $0 | $7,490 |
| 10 | $8,149 | $12,879 | $0 | $0 | $8,149 |
Cost segregation and bonus depreciation
The depreciation shield, and what the 2025 tax law changed.
The depreciation shield is built on the building, not the land. A cost-segregation study accelerates it by moving parts of the building into shorter depreciation lives, and the 2025 tax law (OBBBA) changed the bonus depreciation that can apply to those parts. This estimate depreciates the building straight-line and does not include a cost-segregation study.
Tax-law changes and real estate models: questions to verify — then confirm with a tax advisor.
Tax rules and model limits
The sections of the tax code this estimate applies, and what it leaves out.
Tax rules applied: IRC §167 straight-line depreciation over 27.5 years · §469 passive-activity-loss rules (a $25K allowance for an actively participating owner, phased out between $100K and $150K MAGI — $12.5K for a married-filing-separately filer who lived apart all year, $0 otherwise; losses beyond it are suspended and carried forward, unless you qualify as a real estate professional and materially participate in the rental, or materially participate in a short-term rental) · §1250 recapture at your ordinary rate, capped at 25%, on depreciation claimed · §1(h) long-term capital gains rates · §1411 net investment income tax 3.8% (not on the sale gain of a real estate professional who materially participates in the rental) · 2026 brackets, capital-gain thresholds and standard deduction from IRS Rev. Proc. 2025-32.
Tax figures are estimates dependent on investor federal bracket, MAGI, REP status, filing status, entity type, state tax law, and cost segregation election. Confirm with a CPA before any financing or disposition decision.
Note
A model estimate, not tax advice: consult a tax advisor. Not a commitment to lend. Legal and licensing.Printed November 9, 2026 · http://127.0.0.1:45643/tools/tax-engine
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