: High-income earners may owe an additional 3.8% . 4. Final Wealth Calculation
: The IRS "recaptures" the tax benefits you took during ownership. This is often taxed at a flat rate of up to 25% . calculating after tax future wealth of real estate
To calculate your after-tax future wealth from real estate, you must account for annual cash flow, property appreciation, and the tax liabilities triggered upon a future sale. 1. Project Future Pre-Tax Value : High-income earners may owe an additional 3
Start by estimating what the property will be worth at the end of your holding period. : PVcap P cap V : Current property value . : Expected annual appreciation rate (as a decimal) . : Number of years you plan to hold the property . This is often taxed at a flat rate of up to 25%
Combine your annual earnings with your final sale proceeds to see your total wealth. Real-Estate Profitability Calculations: How Does It Work?
Tax is not calculated on the sales price, but on the "gain" after adjustments . : Taxable Gain : 3. Calculate Exit Taxes
: Calculate your remaining loan balance at year to determine your future gross equity . 2. Determine the Taxable Gain