Calculators Archives - Evergreen Small Business https://evergreensmallbusiness.com/category/calculators/ Actionable Insights from Small Business CPAs Mon, 15 Sep 2025 17:24:18 +0000 en hourly 1 https://wordpress.org/?v=6.9.4 https://evergreensmallbusiness.com/wp-content/uploads/2017/10/cropped-ESBicon-32x32.png Calculators Archives - Evergreen Small Business https://evergreensmallbusiness.com/category/calculators/ 32 32 S Corporation Reasonable Compensation Calculator https://evergreensmallbusiness.com/s-corporation-reasonable-wages-calculator/ Tue, 07 Jan 2025 20:16:44 +0000 https://evergreensmallbusiness.com/?p=38887 Tax law requires S corporations to pay shareholder-employees reasonable compensation. The S corporation reasonable compensation calculator below estimates that number based on May 2025 Bureau of Labor Statistics data, what a S corporation pays other employees, and what distributions and wages a shareholder receives. Additional information about the calculator appears beneath the calculator. Shareholder Distributions: […]

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S corporation reasonable compensation calculatorTax law requires S corporations to pay shareholder-employees reasonable compensation. The S corporation reasonable compensation calculator below estimates that number based on May 2025 Bureau of Labor Statistics data, what a S corporation pays other employees, and what distributions and wages a shareholder receives. Additional information about the calculator appears beneath the calculator.





Additional Information and Instructions

The S corporation reasonable compensation calculator suggests possible S corporation salary amounts based on shareholder distributions, shareholder wages, the highest paid nonshareholder’s wages, and the Bureau of Labor Statistics data for the job.

The distributions a shareholder-employee receives matter for a simple reason. The Internal Revenue Service can reclassify distributions as wages if an S corporation pays unreasonably low wages to a shareholder-employee.

The amount the highest non-shareholder-employee earns also matters. In most situations, a shareholder-employee would need to be paid more than a non-shareholder employee.

The calculator also considers the most up-to-date Bureau of Labor Statistics annual wages data for more than 800 occupations. More specifically, if available, the calculator grabs the 10th, 25th, 50th, 75th and 90th percentile annual wage amounts.

Adjusting for Inflation

The data used in this 2025 version of the calculator reflects May 2024 annual wages which means roughly a year or more of inflation has occurred since the data were collected. (The BLS published the data in Spring 2025 which means at least a two percent adjustment is probably appropriate.) However, keep in mind that salary amounts don’t always move up even if there is inflation. (We noticed that many salary amounts didn’t change or slightly decreased between the May 2023 and May 2024.)

Understanding the S Corporation Reasonable Compensation Amounts

The S corporation reasonable compensation calculator estimates three amounts or ranges: an “aggressive”salary, a “pretty safe” range, and a “very safe” salary.

“Aggressive” Salary Amount

The calculator estimates the lowest possible, or “Aggressive,” S corporation reasonable compensation amount by identifying the smallest of the following three amounts: the S coporation distributions and wages the shareholder-employee will receive during the year, the annual wages paid to the highest-paid non-shareholder employee, and the 10th percentile annual wages number available from the Bureau of Labor Statistics. The calculator suggests the smallest of these values is probably as aggressive as one should be.

Example: An S corporation pays its shareholder $15,000 in wages and another $45,000 in distributions. (That totals $60,000.) Say the S corporation employs another non-shareholder employee and pays that person $50,000. Also say that the tenth percentile annual wage for the job equals $70,000. In this case, the calculator looks at those three numbers ($60,000, $50,000 and $70,000) and suggests that probably $50,000 is as low as the S corporation should pay its shareholder.

Note: If the S corporation leaves the highest paid non-shareholder employee salary input blank, the calculator assumes the only employee is the shareholder. In that case, if the S corporation pays its shareholder $15,000 in wages and another $45,000 in distributions (again $60,000 in total) and the tenth percentile annual equal equals $70,000, the calculator looks at those two numbers ($60,000 versus $70,000) and suggests that the S corporation should pay $60,000 in wages. (This would mean the S corporation should pay zero distributions.)

“Pretty Safe” Salary Range

The calculator estimates the “Pretty Safe Salary Rage” as any amount falling between the 25th and 75th percentiles assuming those values are available.

The idea here is that if a shareholder’s compensation sits at a level where one in four people in the same job make more or make less, probably the shareholder-employee’s compensation falls within the range of “reasonable.” Note that if a particular annual earnings percentile is unavailable, the calculator displays “Unknown.”

“Very Safe” Salary Amount

The calculator estimates a “Very Safe Salary” as the greatest of the following values: The highest annual wages value available from the Bureau of Labor Statistics for an occupation or the wages paid to the highest non-shareholder employee.

In other words, if an S corporation pays its shareholder-employee the highest annual wages value reported by the Bureau of Labor Statistics? Or, if even higher, the wages paid the highest paid non-shareholder-employee working for the S corporation? That’s a pretty safe number in terms of the Internal Revenue Service arguing an S corporation should have paid a shareholder-employee an even larger salary amount.

Tips for Using the Calculator

A handful of tips. First, the calculator uses national averages. If an S corporation shareholder-employee works in a locality with salaries vastly different than the national average, that difference may undermine the usefulness of the calculator’s estimates. Employers may want to nudge the calculated value up or down to adjust for this.

Second, some small corporations employ shareholders in “more than one hat” roles where the worker does two or three jobs on a part-time basis. Thus, some situations will require the S corporation to average salaries from multiple positions to get to a reasonable compensation estimate.

A third and related tip: You probably want to experiment with different Bureau of Labor Statistics’ occupations. The list the calculator looks at is long. And your job may fit well into more than one category.

Fourth finally, this note from a tax accountant who reviewed the earliest version of this calculator: If a small business corporation’s profits are very modest, the calculator’s “Pretty Safe Salary Range” may be impractically high. A firm generating, say, $20,000 in profits before paying shareholder-employees their wages may not be able to pay anything close to the 25th percentile. Thus apply common sense. And understand that for very small (and probably for very large) S corporations, you may need to take the calculator’s suggestions with a grain of salt.

Related Resources for S Corporations

If you’re working to really maximize your S corproation’s tax savings, you might be interested in this recent blog post: Advanced S Corporation Tax Planning Secrets.

You’ve maybe already seen this other calculator, but you can estimate the payroll tax savings your S corporation produces using the S Corporation Payroll Tax Savings Calculator.

If you’ve got access to ChatGPT, you may also want to get its rather useful input on the appropriate salary to pay an S corporation shareholder-employee. We’ve got more information about that here: Using ChatGPT to Determine S Corporation Reasonable Compensation for Shareholders.

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Merton Share Estimator https://evergreensmallbusiness.com/merton-share-estimator/ https://evergreensmallbusiness.com/merton-share-estimator/#comments Fri, 13 Dec 2024 18:00:04 +0000 https://evergreensmallbusiness.com/?p=35401 You can use rules of thumb to determine what percentage to allocate to stocks versus bonds. Like “60 percent to stocks and 40 percent to bonds.” But Nobel Laureate Robert Merton developed a formula you can use to calculate a “Merton share” or optimal allocation to equities. The Merton share estimator below makes this calculation […]

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Use our Merton Share Estimator to calculate an equity allocation based on current market volatility.You can use rules of thumb to determine what percentage to allocate to stocks versus bonds. Like “60 percent to stocks and 40 percent to bonds.”

But Nobel Laureate Robert Merton developed a formula you can use to calculate a “Merton share” or optimal allocation to equities. The Merton share estimator below makes this calculation for you.

Note:
Instructions and additional information appear beneath the calculator.

Merton Share Estimator






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Merton Share Estimator Instructions

The Merton Share Estimator requires five inputs in order to calculate how much you or I should allocate to equities: equity return, equity standard deviation, risk-free return, risk-free standard deviation, and the constant relative risk aversion.

You should be able to get needed estimates of rates of return from the financial services company that holds your 401(k) or Individual Retirement Account. These firms also usually provide a volatility measure, too, which is the standard deviation.

Three tips here. First, if you’ve invested in several different equity classes with different expected returns? For example, if your equities allocation invests 50 percent in U.S. stocks expected to earn three percent and 50% in Non-US stocks expected to earn five percent? You calculate a weighted average return equal to four percent for the blended equities. For example:

50% * 3% + 50% * 5% = 4% weighted average return

A second tip: Adjust for inflation and work with real returns. That approach lets you use Treasury Inflation Protected Securities (TIPS) rates as the risk-free return. To adjust nominal equity returns for inflation, just subtract the inflation rate. For example, a six percent nominal equity return equates to a four percent real return if inflation equals two percent. For example:

6% nominal return – 2% inflation = 4% real return

A third tip: You can probably use historical standard deviations for your calculations. At least to start. Sometimes people say the standard deviation equals 15% roughly. Sometimes 20%. But an online tool like Portfolio Visualizer lets you calculate the actual standard deviation of blended portfolios of equities. Also, the CBOE VIX index shows the expected standard deviation on US stocks expected over the next month. (You can Google to get the most recent VIX value.)

Understanding Merton Share Estimator Calculations

A single formula calculates the Merton share. And that formula basically divides the equity premium by the squared standard deviation, or variance, of equities. So like this:

Equity Premium / Standard Deviation^2 = Equity allocation

For example, in a simple case where equities return two percent more than riskless investments and the standard deviation equals twenty percent? The formula might make this calculation and return .5, or 50%, thus signaling a 50 percent allocation to equities. Here’s the formula:

2% equity premium / (20% standard deviation ^2) = 50% equity allocation

But in practice, it’s a little more complicated. So let me drop down the rabbit hole for just a few sentences.

Nitty Gritty Details of Merton Share Estimator

To calculate the equity premium, the calculator assumes you’ve entered the expected, real, geometric mean return of equities and the expected, real, geometric mean return of risk-free bonds (like Treasury Inflation Protected Securities) along with the expected standard deviations of these two investment choices. (When a financial services company like Vanguard, Blackrock or Fidelity estimates the return you or I might earn from stocks or bonds over a decade? That’s a geometric mean, or average. It may also be nominal so including inflation. Or real, so adjusted for inflation.)

The calculator then estimates the real, arithmetic, mean return on equities and on risk-free bonds, and the difference between the two–which is the equity premium. (To make this estimate, the calculator uses a common but imprecise tweak: It adds half the variance, or the standard deviation squared divided by two, to the geometric return.)

To determine the appropriate allocation to equities, the calculator then does that simple division operation. But with another tweak, this one from Professor Merton. The formula actually divides by equity premium by the standard deviation squared, or the variance, times the constant relative risk aversion input. Thus the actual formula looks like this:

Equity Premium / (Standard Deviation^2*Constant Relative Risk Aversion)

The “constant” lets people assume different risk aversions. Research suggests many people have constant relative risk aversion equal to 2, a level which suggests some risk aversion. And the common range of constants runs from 1 (low risk aversion) to 5 (high risk aversion). For what it’s worth? I think my personal constant relative risk aversion equals 1 or 2. Most people’s relative risk aversion constant equals 2 or 3.

Note: Someone who is risk neutral or nearly so? Their relative risk aversion constant maybe equals 0. And in this case, they ignore risk and focus solely on the expected return.

Observations about Making Merton Share Estimator Calculations

Some quick observations about making Merton share calculations. And about using the calculation results to make better decisions.

First, the calculations suggest that we ought to often bear more risk than we do. Not always, no. And maybe not at the time I’m writing this in December of 2024, but usually individuals should bear more risk to earn higher expected returns.

A second point: The Merton Share Estimator’s calculations suggest that currently (late 2024) a smart way to dial down US investors’ risk is to invest more broadly than just in US stocks. If I model investing half in US stocks and half in international stocks, for example, the calculator suggests maybe a 70 percent allocation to equities for an average-ish risk aversion investor. If I model just investing in US stocks? It suggests less than a 40 allocation to equities for a low risk aversion investor and a 20 allocation to equities for an average-ish risk aversion investor.

Third, and this is personal and anecdotal… but I suspect the more you or I experiment with Merton share calculations? And the more you or I root around to get updated expected returns and standard deviations for stocks and bonds? Yeah. Okay. I think that may jack your or my constant relative risk aversion input. Thus, be careful.

Other Resources

The Super Safe Withdrawal Rate blog post provides a companion discussion and another calculator: Super Safe Withdrawal Rate Calculator.

Professor Merton’s research paper appears here: Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case

The authors of the book, “The Missing Billionaries,” use Merton’s share in their wealth advisory business. Lots of interesting insights appear at their website, including this one: Man Doth Not Invest by Earnings Alone. BTW, “The Missing Billionaires” is dense but a very interesting read.

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The Real Estate Investment Every Entrepreneur Should Consider https://evergreensmallbusiness.com/the-real-estate-investment-every-entrepreneur-should-consider/ Tue, 03 Dec 2024 17:06:26 +0000 https://evergreensmallbusiness.com/?p=35509 I’m not a real estate investment fanatic. I mean, sure, I think real estate investment probably belongs in most people’s portfolios. But you can do that efficiently by holding a REIT index mutual fund or ETF. Some folks can also prudently buy the home or apartment where they reside. But after those obvious options? I’m […]

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Real estate investment that an entrepreneur should consider blog post art: Small busineses in a downtown village.I’m not a real estate investment fanatic. I mean, sure, I think real estate investment probably belongs in most people’s portfolios. But you can do that efficiently by holding a REIT index mutual fund or ETF.

Some folks can also prudently buy the home or apartment where they reside. But after those obvious options? I’m pretty agnostic. Except, that is, for the real estate investment every entrepreneur should consider: Self-rental property your business occupies.

Why Self-rental Property is So Attractive to Entrepreneurs

Self-rental property works great for entrepreneurs for a simple reason. As long as they follow the rules, they can pretty effectively unlock depreciation deductions that normally other real estate investors can’t unlock. Or unlock without spending tons of time or doing lots of fiddling.

A real estate professional by the way can unlock depreciation deductions. But to do that, she or he will need to spend more than 750 hours and more than 50 percent of their time working in a real estate trade or business. They will also need to materially participate in the properties they own if they want to deduct the depreciation—and this can be problematic.

And by the way? Short-term-rental investors? Yes, they can get giant deductions on their return too. And they may be able to materially participate with very modest hours. But they also need to manage the average rental interval of guests. Because in order to qualify as a short-term-rental investor? Your average rental interval needs to equal 7 days or less.

A self-rental property, however? Easy for entrepreneurs if they do it right.

The Self-rental Property Depreciation Deduction Estimator

Take a peek at the simple JavaScript Calculator below. It shows the depreciation deductions you can probably get from a owner-occupied commercial property that cost $1,000,000. The calculator defaults to 100% bonus depreciation (the right percentage for property placed into service on or after January 1, 2025), and it assumes a cost segregation engineer has broken down the price into real property and personal property.








First Year Depreciation: $0.00

Second Year Depreciation: $0.00

Third Year Depreciation: $0.00

Fourth Year Depreciation: $0.00

Fifth Year Depreciation: $0.00

Sixth Year Depreciation: $0.00

Seventh Year Depreciation: $0.00

To summarize, once you click the Calculate button, the Self-rental Property Depreciation Deduction Estimator calculates depreciation deductions for the first year through seventh years. These calculations assume a $1,000,000 price broken down into 25% land, 15% five -year property, 30% fifteen-year property, 0% 27.5-year property, and 55% 39-year property. But what’s unique here? As compared to most real etate investors who will not get to use those gian depreciation deductions? An entrepreneur very probably will.

Tip: Replace the percentages, or decimal values, for your potential real estate investment to estimate actual depreciation you might deduct on your return. And then click Calculate again.

Note: The seventh year’s depreciation is also roughly the depreciation deduction for years that follow the seventh year.

The Usual Problems with Real Estate Depreciation and Other Deductions

The problem with those big deductions however? In many, perhaps most cases, you can’t actually use them. Section 469 of the Internal Revenue Code limits your deductions on a passive investment like real estate to the income you earn from other passive investments. (This is the usual rule for real estate investments, by the way.)

Something special happens with self-rental property that the entrepreneur correctly sets up, however. First, if the entrepreneur groups the rental property with the operating trade or business? That grouping causes Section 469 rules to see the grouped rental property and active trade or business as not a real estate rental activity.

The second thing to happen? The entrepreneur looks at the hours she or she spends on both the rental property and the other active trade or business to determine whether they materially participate. If they spend more than 500 hours on the grouped activities? Bingo.

The First Requirement for Grouping the Rental with the Active Trade or Business

You have two requirements to get a grouping to work. First, the ownership of the rental property needs to perfectly match the ownership of the other operating trade or business. For example, if two shareholders own 60 percent and 40 percent of say an engineering firm? They would also need to own those same percentages—so 60 percent and 40 percent—of the building the engineering firm rents.

Note: You typically would put the real estate into one entity, like a limited liability company. And treat that entity as a partnership. And then the other operating trade or business might be a different partnership. Or a corporation.

The Second Requirement for Grouping

You need to make the grouping in the first year you own the property or operate the trade or business. For example, if this year, you buy a building to house the engineering firm you and your partner have operated for decades? You need to make the grouping election on this year’s tax return.

Note: Not all grouping and aggregation elections need to be made in the first year an activity or trade or business exists. With Section 469 grouping elections like a self-rental, however, the decision not to group the first year is treated as a default grouping. And then the problem that creates? You can’t regroup later on except in special circumstances. And then only with the Internal Revenue Service’s permission.

A Predictable Caveat

Let me end with a predictable caution. One you really don’t even need me to give. (Sorry. But accountants have pretty conservative, compulsive personalties.)

The tax deductions you generate by buying a building and renting it to your business? Very high impact. You may be able to in effect save hundreds of thousands of dollars pretax by using this gambit. (In comparison, remember something like a Section 401(k) plan in the absolutely best case scenario maybe lets you save $70,000-ish of pre-tax money.)

But the tax savings? Not so good an entrepreneur can ignore the return on investment. Thus, we want to treat a prospective real estate investment that same way we’d treat any other business investment. We probably want to calculate the anticipated return on investment. Consider whether and how we can safely use borrowed funds for some of the purchase price. Stuff like that.

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Roth Calculator https://evergreensmallbusiness.com/roth-calculator/ Wed, 25 Sep 2024 16:15:54 +0000 https://evergreensmallbusiness.com/?p=35738 The Roth Calculator below helps you determine whether you end up with more retirement income using a Roth IRA or 401(k). Or using a traditional IRA or 401(k). By the way? Most people probably end up with a better outcome using a traditional IRA or 401(k). But you want to “run the numbers” Click the […]

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Roth Calculator online tool and backgrounder blog post with instructions and additional information.The Roth Calculator below helps you determine whether you end up with more retirement income using a Roth IRA or 401(k). Or using a traditional IRA or 401(k).

By the way? Most people probably end up with a better outcome using a traditional IRA or 401(k). But you want to “run the numbers”

Click the Calculate button to see example calculations using the default inputs. To get actionable insights for your own “Roth or not” decision, replace the default inputs with your own. Detailed instructions and additional information appear below the calculator.

Collect the Roth Calculator Inputs










Simple Strategy Withdrawals

Simple Strategy Traditional Roth
Accumulation
Withdrawal
Less: Taxes
Net Amount

Hybrid Strategy Withdrawals

Hybrid Strategy Traditional Roth
IRA Balance 0
Taxable Acct 0
Accumulation
Withdrawal
Less: Taxes 0
Net Amount

Collecting the Inputs

You need to collect a handful of inputs. Most make intuitive sense. You enter the annual contribution you will make, the years you’ll save and the years you’ll spend, and then the nominal return and inflation rate you expect.

You need to enter at least two tax rates: your saving years “marginal” tax rate and the spending years tax rate on the withdrawals. The saving years marginal tax rate allows the calculator to estimate the taxes you save by making a deductible contribution to a tax-deferred IRA or 401(k). The spending years tax rate allows the calculator to estimate that taxes you’ll pay on the withdrawals from your tax-deferred IRA or 401(k).

Note: Your saving years tax rate usually is higher than your spending years tax rate. Your saving years tax rate equals your top marginal tax rate. The spending years tax rate, in comparison, blends low tax rates and higher tax rates. Also many people, and probably most people, report higher incomes during their working years than during their retirement years.

Understanding the Simple Strategy Results

The Roth Calculator lets you look at simple Roth strategies where you start with a set amount of pre-tax income. (Like $7,000.) And then either you use all of that pre-tax income to contribute to a traditional IRA or 401(k). Or you can first pay the taxes on that income and then contribute the leftover, after-tax amount (like maybe $5,320) to a Roth IRA or Roth 401(k).

Obviously, when you contribute smaller amounts to a Roth account with the simple strategy, you end up with a smaller future value. But that smaller future value represents after-tax savings. Thus, as you draw from the Roth account, you avoid paying income taxes again.

The calculator then assumes you annuitize the IRA balances over the specified years of spending. And that you pay income taxes only on the withdrawals from the traditional IRA or 401(k) at the spending years tax rate.

Obviously, you want to replace the default entries with your own personalized inputs. But the 22% tax rate is what a single filer reporting taxable income between roughly $47,000 and $100,000 might pay in 2024. Or what a married couple reporting taxable income between roughly $94,000 and $200,000 might pay in 2024. The 11% tax rate is what somone might pay by drawing from a roughly $500,000 IRA account and receiving typical Social Security benefits.

Understanding the Hybrid Strategy Results

The Roth Calculator also lets you look at a hybrid strategy where you contribute the same amount to both accounts. (Probably the maximum contribution allowed? So a number like $7,000.) But then you also save the extra tax savings you get from the traditional IRA contribution. In other words, if you save $1700 in income taxes by contributing to a traditional IRA or 401(k), the calculator looks at what happens if you save that money in a tax efficient stock index fund. The calculator assumes you pay qualified dividend tax rates on the dividends during your saving years. Thus, to model the hybrid strategy, you may want to replace the qualified dividends tax rate and the qualified dividends yield with your own numbers.

One other note: The hybrid strategy formulas assume you pay the qualified dividend rate on half of the money withdrawn from the taxable account. That’s probably conservative. Many retirees might pay less tax. (If paying taxes on only half of the money sounds wrong, remember that you’ve already been taxed on the contributions over the years. And on the dividends.)

Additional Resources

If your modeling suggests a Roth IRA or Roth 401(k) doesn’t make sense and that’s a surprise? You might find this old blog post useful: Are Roth-IRAs and Roth-401(k)s Really a Good Deal?

To get up-to-date IRA and Roth-IRA contribution limits refer to the IRS’s “Retirement Topics – IRA Contributions Limits” web page.


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Home Investment Calculator https://evergreensmallbusiness.com/home-investment-calculator/ Wed, 18 Sep 2024 16:58:40 +0000 https://evergreensmallbusiness.com/?p=35671 You can use the Home Investment Calculator below to estimate the pre-tax rate of return you earn by buying and living in a home. Just enter the your inputs and click the Calculate button. If you have questions? No problem. Detailed instructions and additional information appear below the calculations. Collect Home Investment Analyzer Inputs Home […]

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Use the Home Investment Calculator to estimate the return from buying a home.You can use the Home Investment Calculator below to estimate the pre-tax rate of return you earn by buying and living in a home. Just enter the your inputs and click the Calculate button.

If you have questions? No problem. Detailed instructions and additional information appear below the calculations.

Collect Home Investment Analyzer Inputs









Forecasted Cash Flows


Year Rent Expenses Mortgage Cash Flow

Internal Rate of Return on Home

Note: The Cash Flow column shows the down payment including closing costs as a cash outflow at the start of the investment timeframe. The Cash Flow column adds the net sales proceeds after adjusting for mortgage balance to the tenth year’s cash flows.

Additional Information and Instructions

The Home Investment Analyuzer calculator calculates a pre-tax internal rate of return, which is equivalent to a geometric average return and to a compound annual growth rate. With example inputs like those that initually show, you can compare the calculated return to other pre-tax rates of returns. Note that some homeowers such as those who use the current standard deduction amount and who qualify for tax-free gain due to the Internal Revenue Code’s Section 121 exclusion may enjoy an after-tax rate of return equal to the pre-tax rate of return. In other words, regularly with homeownership, the homeowner pays no income taxes on her or his profits.

A key component of this analysis: The calculator assumes that if you own a home, you don’t have to pay rent for the home. Thus, the calculator imputes rental income if you buy a particular home rather than rent that home. (Buying the home intead of renting, of course, also burdens the home owner with the operating costs of the home and with, presumably, carrying a mortgage.)

The calculator makes a number of simplifying assumptions in order to limit the number of inputs required. For example, the calculator assumes that the home value, rent and expenses all increase annually by the inflation rate. The Home Investment Calculator assumes a taxpayer will use a 30-year mortgage and sell the property after ten years. Rather than use detailed schedules of operating expenses and selling expenses, the calculator assumes that the property’s maintenance costs, property taxes and insurance equal a steady percentage year after year. Further, the calculator assumes the selling costs (real esate agent commission, escrow costs, transfer taxes and so on) can be expressed as a percentage of the sales price too.

And a Caution

The Home Investment Calculator won’t prove that home ownership always works as an investment. Or that it always fails. The point here, really: You want to do the calculations. Sometimes home ownership generates attractive tax-free returns. Sometimes it doesn’t.

Other Resources You Might Be Interested In

Are Houses Investments (a blog post we wrote a while back to try and explain in words why homes can be investments)

Lessons from the Rate of Return of Everything paper (an academic research paper about what home ownership returns have historically looked like).

The Rate of Return on Everything, 1870 to 2015 (the actual working paper.)

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Short-term-rental Depreciation Deductions Calculator https://evergreensmallbusiness.com/short-term-rental-depreciation-deductions/ Fri, 30 Aug 2024 18:26:50 +0000 https://evergreensmallbusiness.com/?p=35257 A handful of times recently, prospective real estate investors have asked me about the depreciation deductions they can expect if they successfully setup a short-term rental. The phrasing often goes like this: Okay, Steve, so assume my rental income covers my expenses including the mortgage interest. A breakeven situation, in other words. I’m also going […]

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Short-term-rentals, handled correctly, can produce large depreciation deductions in the early years.A handful of times recently, prospective real estate investors have asked me about the depreciation deductions they can expect if they successfully setup a short-term rental.

The phrasing often goes like this: Okay, Steve, so assume my rental income covers my expenses including the mortgage interest. A breakeven situation, in other words. I’m also going to get depreciation deductions on the property. And if that happens, how big are those deductions going to be?

The calculator below makes this estimate based on real-life guesses about how the cost segregation engineer breaks out the costs. Just enter your own numbers and click Calculate:








First Year Depreciation: $0.00

Second Year Depreciation: $0.00

Third Year Depreciation: $0.00

Fourth Year Depreciation: $0.00

Fifth Year Depreciation: $0.00

Sixth Year Depreciation: $0.00

Seventh Year Depreciation: $0.00

Tips for Using the Short-term-rental Depreciation Deduction Calculator

The initial default inputs reflect a cost segregation for a $1,000,000 residential property the engineer “segregates” as 30 percent five year property, 10 percent fifteen-year property, and 60 percent residential property. These percentages are just guesses–though also actual percentages we’ve seen in real-life studies.

Cost segregation engineers may alternatively assume a short-term-rental is not residental property but rather nonresidential. So, like a hotel. In that situation, you might use a different set of inputs. For example, .15 for the five-year property, .3 for the fifteen year property, and .55 for the nonresidential property. These would also be examples of real numbers we’ve seen on real studies.

Note: The actual percentage allocations depend on the property. Thus, use my examples for seeing how this works. Not for preparing an actual tax return.

The bonus depreciation percentage equaled .6, or 60% for 2024. In 2025, the percentage dropped to .4, or 40%. for property placed into service after December 31, 2024 but before January 19, 2025. Then, the Big Beautiful Tax Bill bumped the percentage to 100% permanently for property placed into service on or after January 19, 2025.

Some Caveats and Qualifications

The short-term-rental depreciation deduction calculator simplifies some of the calculations. It assumes, for example, you use a mid-year convention for the five year and fifteen year property. That’s often the case. But may be overly optimistic if you buy a property late in a year.

The calculator gives you a half year of depreciation on the real property for the first year. That will be close but probably a little too high or little too low in most cases. Depreciation of real property uses a mid-month convention and so looks the actual month you place a property into sevice. Thus, consider the depreciation numbers slightly rough for that first year. They should be close. But not perfect.

And one final comment: The depreciation deduction calculator assumes the short-term rental property is in the United States. Not outside the county.

Additional Resources

The Vacation Rental Tax Strategy (A primer)

The Section 183 Short-term Rental Problem (How hobby loss rules can goof up your investment.)

Surviving Short-term-rental IRS Audits

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Washington State Estate Tax Calculator https://evergreensmallbusiness.com/washington-state-estate-tax-calculator/ Fri, 30 Aug 2024 18:00:43 +0000 https://evergreensmallbusiness.com/?p=35278 Washington state levies an estate tax on people who die with more than a threshold amount of net worth. For estates created before July 1, 2025 that threshold equals $2,193,000, and you can estimate the Washington state estate tax using the calculator shown below. (Instructions and additional information appear below the calculator input and outputs.) […]

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Use our free Washington state estate tax calculator to estimate estate taxes.Washington state levies an estate tax on people who die with more than a threshold amount of net worth. For estates created before July 1, 2025 that threshold equals $2,193,000, and you can estimate the Washington state estate tax using the calculator shown below. (Instructions and additional information appear below the calculator input and outputs.)

Note: For estates created on or after July 1, 2025 use the updated calculator: Washington state tax calculator (2025 Version.)








Taxable Estate: 0.00

Washington Estate Tax: 0.00

Instructions for Washington State Estate Tax Calculator

You need to describe an estate using the roughly half a dozen inputs. But the two things to know are as follows:

First, Washington state subtracts the following items from your taxable estate: Liabilities, spousal transfers, estate administration costs, charitable contributions and then a “standard” exclusion equal to $2,193,000.

Second, if you have out of state real estate, the formulas adjust for this. Washington state doesn’t tax its residents on real property held out of state. (Those other states, by the way, might.) But as an example, if someone holds real estate outside Washington state that amounts to 25 percent of the person’s estate? Washington state only taxes the remaining 75 percent.

The actual tax calculation uses a sliding scale which starts at 10 percent and rises to 20 percent.

One wrinkle for people who have real property outside of Washington state. The values you enter for that property in the “Washington state assets” and “Non-Washington state assets” boxes need to be net of any nonrecourse debt like mortgages the decedent isn’t personally liable for. Use the liabilities box to show the total recourse liabilities.

You ought to consider the calculation results an estimate. But they do give you a sense of the taxes an estate pays.

Other Resources

From our CPA firm website: Washington State Estate Tax Returns: When to File and Pay Taxes and Washington State Estate Tax Planning Tactics

Raemi Gilkerson, a local attorney in Redmond, did a very useful guest blog post that you will find informative: Washington Estate Tax Worries: 3 Tips Save Thousands.

Finally, additional details about the estate tax appear on the Washington Department of Revenue website: Washington State Estate Tax Tables

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