Rental Income Tax Calculator

Rental income tax is the amount of income tax owed on profit earned from renting out property. Unlike wages, rental income allows deductions for a wide range of expenses, which can significantly reduce your taxable liability — or even create a paper loss that offsets other income.

Formula: Net Rental Income = Gross Rent Collected − Allowable Deductions Tax Owed = Net Rental Income × Marginal Tax Rate

What each variable means:

• Gross Rent Collected — all rent payments received during the tax year, including advance rent, lease cancellation fees, and tenant-paid expenses you didn’t reimburse.
• Allowable Deductions — expenses the tax authority permits you to subtract before calculating tax.
• Marginal Tax Rate — the rate applied to your top slice of income; rental income stacks on top of your ordinary income.

Common deductible expenses (US):

• Mortgage interest (not principal repayment)
• Property taxes
• Insurance premiums
• Repairs and maintenance (not improvements — those must be depreciated)
• Property management fees (typically 8–12% of rent)
• Advertising and tenant screening
• Travel to inspect the property
• Depreciation — the most powerful deduction: residential property depreciates over 27.5 years in the US (39 years for commercial). Annual depreciation = Property Value ÷ 27.5.

Worked example: Annual rent collected: $18,000 Mortgage interest: $6,000 | Property tax: $2,400 | Insurance: $900 | Repairs: $800 | Depreciation: $4,200 | Management: $1,440

Total deductions = $15,740 Net rental income = $18,000 − $15,740 = $2,260 Tax at 22% bracket = $2,260 × 0.22 = $497.20

Without depreciation, that same property would show $6,460 of taxable income — depreciation alone saves over $924 in this example.

Important: Depreciation must be recaptured when you sell (taxed at up to 25%), so keep records. Consult a tax professional for property-specific advice.