Rental Property Tax Calculator 2025 β Income, Expenses & Depreciation
Calculate tax on rental property income. Includes depreciation deduction, Schedule E analysis, passive loss rules, and after-tax cash flow.
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Annual Expenses
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Depreciation
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$25K loss allowance phases out $100Kβ$150K AGI $0
Net Rental Income/Loss
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Annual Depreciation
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Taxable Rental Income
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Tax Owed / Savings
Schedule E Analysis
How to Use This Rental Property Tax Calculator
Enter your rental income and all deductible expenses. The calculator automatically computes depreciation (building value Γ· 27.5 years) and shows your net rental income or deductible loss. The passive loss rules determine how much of any loss can be deducted this year.
The Formula
Effective rental income = gross income Γ (1 β vacancy rate)
Depreciation = (property value β land value) Γ· 27.5
Net rental income = effective income β total expenses β depreciation
Passive loss allowed = $25,000 Γ max(0, 1 β max(0, AGI β $100,000) / $50,000)
Taxable rental = max(net income, βpassive loss allowed)
Tax owed = taxable rental Γ marginal rate
Depreciation = (property value β land value) Γ· 27.5
Net rental income = effective income β total expenses β depreciation
Passive loss allowed = $25,000 Γ max(0, 1 β max(0, AGI β $100,000) / $50,000)
Taxable rental = max(net income, βpassive loss allowed)
Tax owed = taxable rental Γ marginal rate
Example
$2,000/month rental, $300K property, $60K land, 24% bracket, $120K AGI:
Gross income: $24,000 | Effective (5% vacancy): $22,800
Expenses: $18,800 | Depreciation: $8,727
Net rental: $22,800 β $18,800 β $8,727 = β$4,727 (loss)
Passive loss allowed ($120K AGI): $25,000 Γ (1 β ($120Kβ$100K)/$50K) = $15,000
Deductible loss: $4,727 Γ 24% = $1,134 tax savings
Gross income: $24,000 | Effective (5% vacancy): $22,800
Expenses: $18,800 | Depreciation: $8,727
Net rental: $22,800 β $18,800 β $8,727 = β$4,727 (loss)
Passive loss allowed ($120K AGI): $25,000 Γ (1 β ($120Kβ$100K)/$50K) = $15,000
Deductible loss: $4,727 Γ 24% = $1,134 tax savings
Extended
Cash-on-Cash Return After Tax
Full return analysis including depreciation tax shield and after-tax cash flow
Full return analysis including cash flow and depreciation tax shield value.
Cash Flow vs Taxable Income Analysis
Frequently Asked Questions
How is rental income taxed?
Rental income is reported on Schedule E and taxed as ordinary income at your marginal federal tax rate. You can deduct expenses like mortgage interest, property taxes, insurance, repairs, and depreciation. The net income (or loss) flows through to your Form 1040. If you have a net rental loss, special rules limit how much you can deduct against other income.
What is depreciation on rental property?
The IRS allows you to deduct the cost of residential rental property (building only, not land) over 27.5 years using straight-line depreciation. For a $300,000 property with $50,000 land value, the depreciable basis is $250,000. Annual depreciation = $250,000 Γ· 27.5 = $9,091. This is a paper deduction β you don't actually spend the money, but it reduces taxable rental income.
What is the passive activity loss rule?
Rental losses are generally passive and can only offset passive income. However, there is a special allowance: if you actively participate in managing the property, you can deduct up to $25,000 of rental losses against ordinary income. This $25,000 allowance phases out between $100,000 and $150,000 of AGI. Real estate professionals can deduct unlimited rental losses.
Do I pay self-employment tax on rental income?
Generally no. Rental income from a passive investment is not subject to self-employment (SE) tax. However, if you provide substantial services (like a hotel or B&B), it could be treated as active business income subject to SE tax. Net Investment Income Tax (NIIT) of 3.8% applies to rental income for taxpayers with income over $200,000 (single) or $250,000 (MFJ).
What is depreciation recapture?
When you sell a rental property, the depreciation you've taken is "recaptured" and taxed at up to 25% (ordinary rate, capped at 25%). For example, if you've taken $50,000 in depreciation over the years, $50,000 of your gain is taxed at 25% rather than the lower long-term capital gains rate. Proper tax planning before selling can minimize this impact.