Oh, duh, cash flow is obviously before taxes, I calculated that in my first post, then forgot that when I made the last post.
which currently gives me about $90,000/year in cash flow before taxes
I'm assuming the 90k cash flow is net of expenses, any mortgages, etc. but before depreciation.
So 90k in net real estate cash flow before taxes. I would think depreciation would get that down quite a bit.
Here is the big mistake though:
So based on a approx. 25% tax bracket my rental income after taxes
Huh? :)
25% tax bracket? Not even close!
With 2 adults + 4 kids you're looking at 4050 personal exemption/person = 24,300. Standard deduction of 12,600. 4k in child tax credit (credit, not deduction).
Those, plus the aforementioned depreciation, should be able to take your 90k in real estate net income and reduce your taxes to around $0.
Heck, even if you had NO depreciation: 90k-24,300 exemptions-12,600 standard deduction = 53.1k taxable income.
That works out to $7037.5 (10% on first 18,550, 15% on next $34550--up to 75,300) minus the 4k in child tax credits = $3k due in taxes.
That's with zero depreciation. If you have depreciation to knock that 90k cash flow down, it'll be quite a bit lower. What was your claimed depreciation last year?
That means from your 90k cash flow, you pay 3k in taxes, leaving you with 87k. Spend 75k, that leaves you with 12k to plow into reserves.
Still cutting it too close for me, based on my thoughts in this thread, and why you need to have a positive savings rate and be reinvesting income if you FIRE with real estate:
http://forum.mrmoneymustache.com/real-estate-and-landlording/4-withdrawal-rate-if-investing-in-real-estate/But you're probably a lot closer than you think. Knocking off 25% for taxes is silly, when my above calculations were about 3% in taxes (3k on 90k), and you'd likely be even lower than that with the depreciation.