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Rental Income Tax Estimator
Net rental income after expenses, taxed at your marginal rate.
How rental income is taxed
Rental income is generally taxed as ordinary income, but you get to subtract your rental expenses first — mortgage interest, property tax, insurance, repairs and maintenance, and depreciation (a non-cash deduction for the wear and tear on the building itself, spread over its useful life). What's left is your net rental income, taxed at your regular marginal federal rate. If expenses exceed income, you have a loss.
Passive activity loss limits
Rental real estate is usually considered a "passive activity" by the IRS, and passive losses can only offset passive income in most cases. There's a notable exception: if you actively participate in managing the property, you may be able to deduct up to $25,000 of rental losses against your other (non-passive) income each year — though that allowance phases out as your modified adjusted gross income (MAGI) rises from $100,000 to $150,000. Losses you can't use currently generally carry forward to future years. This area has real complexity — a CPA can tell you exactly how it applies to your situation.
Not tax advice. Figures use the 2024 federal tax year and are estimates for general education only — every situation is different. Confirm your numbers with a CPA or tax professional, and check the current year's IRS figures, before filing or making financial decisions.
Frequently asked questions
What counts as a deductible rental expense?
Common ones include mortgage interest, property tax, insurance, repairs and maintenance, property management fees, and depreciation. Capital improvements (like a new roof) are usually depreciated over time rather than deducted all at once — this tool treats depreciation as a single annual input for simplicity.
What if my expenses are more than my rental income?
You have a rental loss. Whether you can deduct that loss against your other income this year depends on the passive activity loss rules — you may be able to deduct up to $25,000 if you actively participate and your income is under the phase-out range, otherwise the loss typically carries forward.
Does this account for depreciation recapture when I sell?
No — this tool only estimates the annual tax on rental operations. Selling a rental property triggers separate tax consequences, including depreciation recapture, which this calculator doesn't model.
Should I use my marginal or effective tax rate here?
Use your marginal federal tax rate — the rate that would apply to the next dollar of ordinary income — since rental income (if positive) stacks on top of your other income. The Federal Income Tax Calculator on this site can help you find it.