Question

If John's investment property has an NOI of $100,000 the first year, mortgage payments of $75,000 with $60,000 in interest, and a first-year depreciation of $55,000, how much tax will John pay?

Answer 1

Answer:

$0

Explanation:

Given,

Net Operating Income from the investment = $100,000

Less: Depreciation                                              (55,000)

Earnings before interest and taxes                      45,000

Less: Interest on Mortgage                                (60,000)

Earnings before taxes                                          (15,000)

Less: Tax (1)                                                                      0

Net Income (Loss)                                              $(15,000)

Note: (1) As John incurs a loss after paying the interest, he does not have to pay any taxes.

Therefore, John will not pay any taxes.