Tax Calculators – How Useful Are They, Really?

Tax calculators are a popular feature of many real estate websites and services. But how well can they account for the nuances that go into determining how much you owe Uncle Sam?

Anyone who owns a rental house – or is thinking of buying one – needs to keep the tax consequences in mind. Each aspect of the ownership picture – from depreciation, to expense write-offs, to of course overall income – will have implications for your personal taxes. 

If you don’t own the home personally, but in an entity that files a separate tax return, such as a C-Corp,  that’s a different story completely. There are pros and cons to that decision, and here’s a good summary of them.

At  Belong – a new kind of modern property management company – we have built a tech-forward platform that helps homeowners keep all their financial ducks in a row, and stay organized. You won’t have to be chasing your paperwork -  it’s all in one place – including any improvements you’ve made through Belong. That’s because Belong employs its own contractors and manages the entire process.

We know from our homeowners that it can be a real effort to stay on top of their personal finances, and their taxes.  They ask us all the time about whether a tax calculator can be useful as they keep track of their tax liabilities during the year.   That’s not surprising, because, in addition to owning real estate, many of them are entrepreneurs who have multiple sources of income and dynamic, unpredictable tax situations.

Which Tax Calculator is Best for Landlords?

When you Google “tax calculator” – and a lot of people are doing it, because there are 675M hits – there is no shortage of links that pop up.  To make your life easier, your intrepid friends at Belong spent some time analyzing them to see if there is one that rises to the top of the calculation heap.

To start with, there are a lot of familiar names that show up high on the first page. Not surprisingly, there are free tax calculators and “estimators”  being offered by H&R Block, TurboTax, Nerdwallet, Jackson Hewitt, and many others. 

In the cases of the big names, for the most part, these calculators are a marketing technique, they are offered “free” but their goal is to sell their software programs.  So you have to enter some personal information before you have access to the full platform. Of the ones listed above, Nerd Wallet gives you the most access without being sucked into their sales funnel.  AARP also has a calculator that doesn’t require too much disclosure. 

Keep in mind these are very basic tools, so use them only as guidelines.  It’s best that you have access to an accountant, especially given what looks like dramatic, upcoming changes in the tax code.  That’s especially true if you are self-employed.   We found two calculators that are designed for those who are not traditional W-2 employees, one is from TaxAct and the other from KeeperTax.  

Given the complexities of owning a rental house, while a tax calculator can be useful for providing some basic guidance, expert accountants can pay for themselves.  If you don’t have one, and your personal network has been exhausted, there are platforms like 1800Accountant that might be useful. Unless you feel really confident, being your own accountant can be as risky as being your own electrician.

Lastly, to wrap this up, who knows more about the taxes than the IRS? They have an online tax withholding estimator that is pretty good and is free of charge.

One more calculator to consider

While you're busy doing maths, take a look below at our back-of-the-napkin maths calculator to do some quick sums on putting your rental on Belong. Not only will we make your finances easier, all maintenance expenses, management and placement fees are tax deductible.