Rental Income Tax Calculator

Rental income is taxed as ordinary income at your marginal federal tax rate after deducting expenses like mortgage interest, property taxes, insurance, repairs, management fees and depreciation. Net rental income is reported on Schedule E of your tax return. It is not subject to self-employment tax unless you are classified as a real estate professional.

Common deductions include mortgage interest, property taxes, insurance premiums, repairs and maintenance, property management fees, advertising, legal and accounting fees, travel to the property, and depreciation of the building (over 27.5 years for residential property). Land cannot be depreciated.

The Net Investment Income Tax (NIIT) is an additional 3.8% tax on rental income, interest, dividends and capital gains for individuals with modified adjusted gross income above $200,000 (single) or $250,000 (married filing jointly). These thresholds are not indexed for inflation.

Generally no. Passive rental income reported on Schedule E is not subject to the 15.3% self-employment tax. However, if you are classified as a real estate professional who materially participates in rental activities, or if you provide substantial services to tenants, the income may be considered active and subject to SE tax.

Residential rental property is depreciated over 27.5 years using the straight-line method. If you bought a rental for $300,000 and the building value (excluding land) is $240,000, your annual depreciation deduction is about $8,727. This paper loss reduces your taxable rental income even though no cash was spent.

If you actively participate in managing your rental and your modified AGI is below $100,000, you can deduct up to $25,000 in rental losses against other income. This allowance phases out between $100,000 and $150,000 AGI. Above $150,000, passive losses are generally suspended until you sell the property or have passive income to offset them.