'Initial One-Time Expenses' have no impact on the basis.

Initial One-Time Expenses - are payments made that can be expensed (not depreciated) in the first tax year. The date you enter determines the length of the cash flow statement that the calculator prepares.Įstimated Selling Costs - Usually, this is the commission paid to the real estate broker and well as fees to the attorney. What happens if an investor needs time to renovate the property? It is feasible that a property is not ready to rent for months after closing, and the delay impacts cash flow.ĭate Property Sold - In almost all cases, you'll be entering an estimated date. Other rental income calculators don't offer this flexibility. If they are not the same date, then the 'In Service Date' must be the first of any month after 'Closing Date.' 'In Service Date' and 'Closing Date' may be the same day. In Service Date - The day rental income and depreciation start.

Note, if you set neither the 'Estimated Selling Price' or 'Annual Appreciation' price to zero, then to keep both in sync, the calculator will recalculate 'Annual Appreciation.'Ĭlosing Date (purchase date) - The day the buyer takes ownership of the property and the closing date for the mortgages. Set this to '0' and the calculator will calculate it using the 'Annual Appreciation' rate.Īnnual Appreciation - If you do not want to estimate a selling price but rather instead assume a set rate of appreciation, set the property's appreciation rate here. The selling price determines the capital gain or loss. Business use impacts the depreciation calculation.Įstimated Selling Price (FV) - The rental income calculator creates a cash flow statement from the time you purchase the property until you sell it. For example, if the rental building has three equally sized rental units and you live in one and rent two, then set business use to 66.6% (two-thirds). Interior Improvements, for example, built-in appliances, kitchen modernization, flooring, wall-to-wall carpetingīusiness Use - Set this to 100% unless you use part of the structure for personal use.Miscellaneous items such as storm windows, doors, new roof, central vacuum, wiring upgrades.Lawn & Grounds including landscaping, driveway, walkway, fence.Additions such as bedroom, bathroom, deck.An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use.': You must capitalize any expense you pay to improve your rental property. Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs and sales commissions.Īnd from Publication 527, p5, 'Improvements.Legal fees (including title search and preparation of the sales contract and deed).Charges for installing utility services.Abstract fees (abstract of title fees).Per IRS Publication 551 2016, Basis of Assets, p2, 'the following items are some of the settlement fees or closing costs you can include in the basis of your property':

The calculator adds these costs to the purchase price to calculate the 'Adjusted Basis.' (That is, you cannot immediately expense them.) Here is where you include all one-time costs that you cannot expense per the IRC. You must depreciate some expenses related to closing and developing a building for use. You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up.'Īdditions to Purchase Price - When buying a rental property, taxpayers cannot expense (deduct from income), all the costs associated with purchasing and preparing a building for use. This includes land and certain excepted property. The estimated value gets deducted from the 'Adjusted Basis.' Per IRS Publication 527 Residential Rental Property 2016, p.6, 'Certain property cannot be depreciated. Value of Land - Estimate the value of the land. In tax terms, the closing price is the 'basis.' Purchase Price - The closing price or contract price of the rental property. Options, settings, and inputs explained Property

Mortgage cash flow calculator