Full-cycle analysis for Massachusetts rental property investments — mortgage amortization, depreciation tax shield, passive-loss limits, and after-tax return at sale.
Summary
Cap rate (year 1)
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NOI ÷ purchase price
Cash-on-cash (year 1)
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Pre-tax year-1 cash flow ÷ cash invested
Simple ROI (total)
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Can overstate return if cash was added over time — see IRR
IRR (annualized)
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Time-weighted — the number to trust
Step 1 — Cash Invested
Step 2 — Year 1 Operating Cash Flow
Step 3 — Cash Flow Over the Holding Period
Step 4 — Depreciation & Passive-Loss Tax Benefit
Step 5 — Sale
Step 6 — Overall Return
Property Value vs. Loan Balance
Year-by-Year Detail
Methodology & assumptions
Mortgage is a standard fixed-rate, fully amortizing loan; the P&I payment is constant for the full term. An all-cash purchase (100% down) is supported and correctly produces $0 debt service.
Property tax is modeled as a % of the original purchase price, growing at the entered rate each year. Prop 2½ caps the town's total levy, not your individual bill — if your property appreciates faster than the town average, your own reassessment can rise faster than 2.5%/yr. Set the growth rate closer to your appreciation rate for a more conservative estimate.
Depreciation is straight-line over the entered period (default 27.5 years, IRS residential rental standard). The depreciable building basis is (purchase price + closing costs) × (1 − land %) — closing costs are capitalized into the basis and allocated between land and building in the same ratio as the purchase price, consistent with how they're treated at sale. Depreciation stops once fully depreciated.
Passive activity loss rules: if you actively participate, up to $25,000 of rental loss per year is deductible against ordinary income, phased out 50¢ per dollar of MAGI between $100,000 and $150,000 (fully phased out at/above $150,000). Any loss above the allowance is suspended and carried forward, and fully released in the sale year per IRC §469(g).
Net Investment Income Tax (NIIT): 3.8% applies both to rental income each year and to the sale gain, whenever MAGI (your entered "other household income" plus that year's property income/gain) crosses your entered threshold ($250,000 MFJ / $200,000 single by default).
Federal tax at sale uses real bracket stacking, not a flat rate: your entered standard/itemized deduction shields income from the bottom up (other income first, then §1250 recapture, then regular LTCG); §1250 recapture is taxed at the lesser of 25% or your implied federal ordinary rate (derived from your combined rate minus the MA rate) — never a flat 25%; remaining LTCG is then taxed at 0/15/20% based on where it lands in the stack after other income and recapture. This means selling in a low-income year can genuinely realize $0 federal tax on a meaningful gain — enter your real numbers to see if that applies to you. Bracket thresholds are editable; verify the current-year figures for your filing status.
Massachusetts taxes the full gain as ordinary income at your entered MA rate (no preferential capital-gains rate) and deed excise tax is estimated at $4.56 per $1,000 of sale price by default (editable — Barnstable County uses $5.70/$1,000).
The optional MA 4% surtax and the NIIT MAGI check both stack the sale gain on top of the single "other household income / MAGI" figure you enter — a simplification of a real household return, but consistent across every threshold check in this tool (unlike having separate, disconnected income inputs for each).
IRR is solved numerically over the full cash-flow timeline: initial cash outlay at year 0, after-tax operating cash flow each year, plus net sale proceeds in the final year.