your investment expense saves you 35% in tax. If you are going to give credit to the expenses side then you'll have to reduce the income side as well . Simple for ya: your $130,000 in tile increased you income by $200,000 in 6 years. So 200,000(extra income) - 130,000(tile expense) = $70,000 profit 70,000 x 35%(tax rate you used) = $45,500 profit after taxes for ALL six years 45,500(after tax profit) / 6(years) = $7583(average after tax yearly profit) 7583(average after tax yearly profit) / 84500(after tax cost of tile) = 8.9% ROI Still a real nice return, but lets not confuse it with a great return. |