12/17/2024
Here is how to NOT pay 1 dime in taxes if you make $100-150k a year as a W2, in case you didn’t know how easy it really is…
Oh, and take control of your financial future
Through buying rentals…
Let’s break this down for someone earning $100,000 in W-2 income with a spouse who qualifies as a real estate professional…
1. Federal Income Tax Overview
For 2024, a married couple filing jointly:
• Standard deduction = $29,200
• Taxable income after deduction = $100,000 - $29,200 = $70,800
Using 2024 tax brackets:
• 10% on first $23,200 = $2,320
• 12% on the next $47,600 = $5,712
Estimated Federal Tax Liability = $8,032
(Effective tax rate: ~8-9%)
2. Depreciation Per Property
For a $150,000 rental property:
• Land value = $30,000 (non-depreciable)
• Building value = $120,000
• Annual depreciation = $120,000 ÷ 27.5 ≈ $4,364
3. How Many Properties Are Needed to Offset Taxes?
Number of Properties = Tax Liability / Annual Depreciation Per Property
Number of Properties= 70,800/4,364 ≈ 16-17
(about 16-17 properties)
4. State Income Taxes
• If your state has income taxes, depreciation will likely carry over and reduce state taxable income.
• Depreciation would reduce this taxable income, leading to state tax savings in addition to federal.
So, With a W-2 income of $100,000, approximately 16-17 rental properties valued at $150,000 each would generate enough depreciation to wipe out federal income taxes.
In addition, according to using averages with a rental calculator - these properties will:
- based on history should appreciate by 3-4% per year on avg. if you were to sell in 20 years, each one will have a Cash on Cash return of 856% each house, net an avg $279k in additional cashflow each house, if appreciates could profit around $308k per house along with the principal buy down a tenant gives you
And give you a 15% return backed by a physical asset on each house
Something the stock market cant do!
And to top it off, you can do this with NONE of your own money…
**ask your cpa for further details on exact numbers that fit your scenario
