Rental Income Tax Calculator
See the full picture of how rental income is taxed — Schedule E deductions, depreciation shield, passive loss rules, and after-tax cash flow.
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Taxable Rental Income
($1,473 loss)
Paper loss — may reduce your taxable income depending on MAGI
Gross Rental Income
$24,000
Total Deductions
$25,473
Estimated Tax Owed
$0
Depreciation Deduction
$7,273
Advanced
Deduction Categories & Passive Loss Rules
All Schedule E deductions, MAGI-based passive activity rules, and bracket impact
Schedule E allows deductions for all ordinary and necessary expenses. Enter additional expense categories below (they already include the Quick Calculator inputs above).
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Taxable Income (All Deductions)
($3,873 loss)
Total deductions: $27,873 · Tax: $0
Note: Repairs vs. improvements: A repair (fixing a leaky faucet) is immediately deductible. An improvement (adding a bathroom) must be depreciated over 27.5 years. Mixed projects should be allocated between repair and improvement with your CPA.
Pro
Portfolio & Advanced Analysis
Multi-property portfolio, QBI deduction, year-by-year depreciation + after-tax cash flow
Aggregate multiple rental properties. Losses from one property can offset income from another. Prior-year passive loss carryforwards reduce current-year taxable income.
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| Property | Gross Rent | Total Deductions | Net Income (Loss) |
|---|---|---|---|
| Property 1 | $24,000 | $25,473 | ($1,473) |
| Property 2 | $18,000 | $20,454 | ($2,454) |
| Property 3 | $30,000 | $34,090 | ($4,090) |
| Portfolio Total | $72,000 | $80,017 | ($8,017) |
Portfolio Net Income
$0
Prior Loss Carryforward Used
$0
Portfolio Tax Owed
$0
New Loss Carryforward
$8,017
Deductible in future years or at sale
How Rental Income Is Taxed
Rental income is reported on Schedule E and taxed as ordinary income at your marginal federal rate — the same bracket as your wages. Unlike capital gains, there is no preferential rate for net rental income. However, the tax code provides substantial deductions that often turn rental income into a paper loss, even when you are cash-flow positive.
Taxable Rental Income = Gross Rent − Total Deductions
Total Deductions = Operating Expenses + Mortgage Interest + Depreciation
Estimated Tax = Taxable Income × Marginal Rate
Total Deductions = Operating Expenses + Mortgage Interest + Depreciation
Estimated Tax = Taxable Income × Marginal Rate
Schedule E Deductions You Should Not Miss
- Mortgage interest: Fully deductible for rental properties (unlike primary home which has a $750,000 cap).
- Depreciation: Residential rentals depreciate over 27.5 years. This is a non-cash deduction — you get a tax write-off without spending money. On a $300,000 property with $60,000 land, that is $8,727/year.
- Repairs and maintenance: Immediately deductible if they restore existing condition (not improvements).
- Property management: Typical 8–12% of gross rent. Fully deductible.
- Property taxes, insurance, HOA: All deductible in the year paid.
- Travel: Mileage to the property for maintenance at the IRS standard rate ($0.67/mile in 2024).
- Legal and professional fees: Eviction costs, CPA fees allocated to rental, attorney fees.
- Advertising: Listing fees, yard signs, online platforms.
Example: Rental Property Tax Calculation
Single-Family Rental — 22% Bracket
| Gross Annual Rent | $24,000 |
| Maintenance & Repairs | ($2,400) |
| Insurance | ($1,800) |
| Property Taxes | ($3,600) |
| Property Management (10%) | ($2,400) |
| Mortgage Interest | ($8,000) |
| Depreciation ($300K − $60K land / 27.5) | ($8,727) |
| Taxable Rental Income | ($2,927) — Paper Loss |
| Tax Owed (at 22%) | $0 |
| Cash Flow (before depreciation) | $5,800 |
Despite positive cash flow of $5,800, depreciation creates a paper loss — no tax is owed on rental income, and the loss may offset other income if MAGI allows.
Frequently Asked Questions
Rental income is taxed as ordinary income at rates from 10–37%. When you sell a rental property held over one year, the profit is taxed at preferential long-term capital gains rates (0%, 15%, or 20%). However, any depreciation you claimed is "recaptured" at 25% — a separate and often overlooked tax. A 1031 exchange can defer both capital gains and depreciation recapture tax.
If your rental creates a loss (common due to depreciation), you can deduct up to $25,000 of that loss against your ordinary income — but only if your MAGI is $100,000 or below and you actively participate in management. The allowance phases out at $2 for every $1 your MAGI exceeds $100,000 and disappears completely at $150,000. Losses exceeding the allowance carry forward to future years.
REPS allows you to treat rental losses as non-passive, meaning they can offset all income — wages, business income, etc. — without the $25,000 cap or MAGI phase-out. To qualify: you must spend 750+ hours per year in real estate activities AND real estate must be your primary profession (more than half of all your working hours). This is a significant tax advantage for high-income real estate investors whose spouse qualifies as a REPS.
Yes, potentially. Under IRS Notice 2019-07, a rental portfolio that provides 250+ hours of rental services per year qualifies for the Section 199A safe harbor, allowing a 20% deduction on net rental income. This can be a powerful tax benefit — on $20,000 of rental income at a 24% rate, the QBI deduction saves $960/year. The deduction phases out for very high earners and has W-2 wage limitations above threshold incomes.
When you sell a rental property, the IRS "recaptures" all depreciation you claimed over the years, taxing it at a flat 25% rate (regardless of your bracket). On a $240,000 depreciable property held for 15 years, you would claim ~$130,909 in depreciation and owe ~$32,727 in recapture tax. The primary strategies to avoid it: (1) 1031 Exchange — defer both capital gains and recapture tax by rolling proceeds into a like-kind property, or (2) Hold until death — heirs get a stepped-up basis, eliminating both capital gains and recapture tax.