Taxable Income

After a while, here is another definition of an Real Estate Analysis term – the taxable income.

Taxable income is the amount on which the taxes have to be paid. It is different from the net operating income, because there are certain tax laws that dictate which expenses are deductible. It is not possible to deduct the whole mortgage payment, but it is generally possible to deduct the entire interest portion. Depreciation is also deductable. It is not possible to use the whole purchase price for tax deductions, because only the portion representing the buildings (not the land) can be deducted according to the tax code.