About the Rental Income Tax Calculator
This rental income tax calculator estimates the federal tax on a residential rental property for tax year 2026. It follows Schedule E: rent collected, minus operating expenses such as mortgage interest, property tax, insurance, repairs and management fees, minus depreciation on the building. Depreciation is what turns many cash-flowing rentals into a tax loss — residential buildings are written off over 27.5 years using the mid-month convention, while land is never depreciated.
If the property shows a loss, the passive activity rules decide whether you can use it now. Landlords who actively participate (approving tenants, setting rent, arranging repairs) can deduct up to $25,000 of rental losses against wages and other income, but that allowance shrinks by 50 cents for every dollar of modified AGI over $100,000 and is gone at $150,000. Losses you cannot use are suspended and carried forward until you have passive income or sell the property.
The tax figure is the change in your 2026 federal income tax caused by the rental, using the standard deduction and 2026 brackets (IRS Rev. Proc. 2025-32), plus the 3.8% net investment income tax on rental profit when your income exceeds $200,000 ($250,000 joint). Real estate professional status, the QBI deduction, state tax and depreciation recapture on sale are not modeled.
With the default inputs, the federal tax on rental income is −$1,037.28. Change any value above to recalculate instantly.
How to use the rental income tax calculator
- 1Choose your filing status and enter your other income.
- 2Enter monthly rent and an expected vacancy rate.
- 3Fill in yearly expenses: mortgage interest, property tax, insurance, repairs, management and other.
- 4Enter the building’s cost basis without land and when it was placed in service.
- 5Read your net rental income, any deductible or suspended loss, and the tax effect.
Formula and method
Net rental income is rent collected minus deductible operating expenses (mortgage interest, property tax, insurance, repairs, management and other costs) minus depreciation. Residential rental buildings are depreciated straight-line over 27.5 years with the mid-month convention, so the first-year fraction f is (12 − month + 0.5) ÷ 12 and a full year is 3.636% of the building basis. Mortgage principal is not deductible.
A loss is limited by the passive activity rules: with active participation up to $25,000 is deductible, reduced by half of modified AGI above $100,000 (zero at $150,000; married filing separately while living together gets none). The tax shown is the difference between your 2026 federal income tax with and without the rental, using the standard deduction, plus 3.8% NIIT on rental profit where income exceeds $200,000 ($250,000 joint, $125,000 separate). Other income is used as the MAGI figure.
- Basis
- Building cost excluding land, plus capital improvements
- f
- Fraction of the year in service (mid-month convention)
- MAGI
- Modified AGI, here your income before the rental
Worked examples
Single-family rental showing a tax loss
Rent of $2,000 a month with 5% vacancy brings in $22,800. Expenses including an 8% management fee ($1,824) total $18,424, and depreciation on a $250,000 building is $9,090.91, producing a $4,714.91 loss. With $85,000 of other income the full $25,000 allowance is available, so the loss offsets salary taxed at 22% and saves about $1,037.
Paid-off condo with a profit
Rent collected is $20,520. Expenses are $8,200 and depreciation on $150,000 is $5,454.55, leaving $6,865.45 of taxable rental income. On top of $60,000 of other income ($43,900 taxable), the first $6,500 is taxed at 12% and the last $365 at 22%, adding about $860 of federal tax.
High earner whose loss is suspended
The same property produces a $4,714.91 tax loss, but with $160,000 of other income the $25,000 allowance is fully phased out (it ends at $150,000). The whole loss is suspended and carried forward, so the rental has no effect on this year’s tax; cash flow after $4,000 of principal is $376.
Frequently asked questions
How is rental income taxed?+
Net rental income — rent minus expenses and depreciation — is added to your other income and taxed at your ordinary federal rates of 10% to 37%. It is not subject to self-employment tax, but high earners may owe the 3.8% net investment income tax on it.
What expenses can I deduct on a rental property?+
Common deductions include mortgage interest, property taxes, insurance, repairs and maintenance, property management fees, HOA dues, utilities you pay, advertising, travel to the property and depreciation. Mortgage principal and improvements are not deducted immediately; improvements are depreciated.
How does rental property depreciation work?+
Residential rental buildings are depreciated over 27.5 years using straight-line and the mid-month convention, so a full year deducts about 3.636% of the building’s cost basis. Land is not depreciable, so subtract its value from the purchase price.
Can rental losses offset my salary?+
If you actively participate, up to $25,000 of rental losses can offset wages and other income each year. The allowance phases out between $100,000 and $150,000 of modified AGI. Unused losses carry forward and are released when you sell the property.
Do I pay tax on rental income if I have a mortgage?+
You pay tax only on net rental income. Mortgage interest is deductible, so many mortgaged rentals show little or no taxable income — especially after depreciation — even when they produce positive cash flow.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.