After-tax cash-on-cash return calculator

By Tom, CPA · Updated October 27, 2026

TL;DR: Cash-on-cash return is annual cash flow divided by the cash you put in. After tax, depreciation changes the picture: it is a deduction without a cash outlay, so many rentals show a tax loss while putting cash in your pocket. Whether that loss saves tax now depends on the passive loss rules. This calculator shows both returns, with 27.5-year residential depreciation and an option for suspended losses.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Real estate investors love cash-on-cash return because it answers the only question that matters at 2 AM: how much money actually shows up each year for the cash I put in? But most calculators stop before taxes, which is like reviewing a restaurant by the menu photos. Depreciation, mortgage interest and passive loss limits can make a modest 6% deal look different after tax, in either direction.

Plug in your numbers below. Depreciation uses the 27.5-year straight-line schedule for residential rental buildings (Publication 527), simplified to a full year. Background: rental real estate tax strategies.

CPA Warning Label: Depreciation isn't free: it lowers your basis, and when you sell, the depreciation you took (or could have taken) is taxed at up to 25% as unrecaptured Section 1250 gain. After-tax cash-on-cash flatters the holding years and ignores that bill.

How to use it

• Purchase price and building share: land doesn't depreciate. Use your county assessment ratio or an appraisal to split building from land.
• Cash invested: down payment, closing costs and initial repairs.
• Operating expenses: property tax, insurance, repairs, management, utilities you pay, HOA and a vacancy allowance.
• Interest and principal: from your amortization schedule. Interest is deductible; principal is not, but it is cash out.
• Tax rate: your combined marginal federal and state rate.
• Loss usable: enter 1 if you can deduct rental losses this year, 0 if they'd be suspended.

When can you deduct a rental loss?

Rental losses are passive. You can deduct them against wages only if: you actively participate and your modified AGI is under $100,000, which allows up to $25,000, phasing out completely at $150,000; you qualify as a real estate professional and materially participate; or you have other passive income to absorb them (Publication 925). Otherwise, losses carry forward until you have passive income or sell. Short-term rentals have their own rules. See rental property losses against W-2 income.

Illustration

A $300,000 duplex, 80% building, with $75,000 of cash in. Rent $30,000, operating expenses $10,000, interest $12,000, principal $3,500. Pre-tax cash flow: $4,500, a 6.00% cash-on-cash return.

Depreciation: $240,000 ÷ 27.5 = $8,727.27. Taxable income: −$727.27, a paper loss while $4,500 hits the bank. If the owner earns too much to use the loss, it's suspended and the after-tax return is still 6.00%, with no tax due on the $4,500. If the loss is usable at a 24% rate, it saves $174.55, for 6.23%.

Raise rent to $36,000 and the property shows $5,272.73 of taxable income. At 24%, that costs $1,265.45, so a 14.00% pre-tax return becomes 12.31% after tax. Still sheltered by depreciation, just not completely.

Ways to improve the after-tax number

• Get the land split right: a defensible, higher building percentage means more depreciation each year. Use the assessor ratio or an appraisal, and keep the support in your files.
• Capture every deductible expense: travel to the property, supplies, software, legal and accounting fees all reduce taxable rental income. See the rental property deductions list.
• Use the safe harbors: the $2,500 de minimis safe harbor lets you expense many small purchases instead of depreciating them.
• Track suspended losses: they become valuable when you sell, or when your income drops in early retirement and the $25,000 allowance opens up.
• Time big repairs: repairs are deductible now, while improvements are depreciated, so classify them correctly rather than optimistically.

Keep in mind the after-tax return is only as good as your rent and expense estimates. Use a vacancy allowance and real repair history, not the seller's pro forma.

What it leaves out

• Appreciation and principal paydown as wealth (principal is treated only as cash out).
• Depreciation recapture and capital gains at sale.
• Cost segregation or bonus depreciation, which front-load deductions; see the cost segregation calculator.
• The mid-month convention in the first and last years.
• The 3.8% NIIT on rental income for higher earners.

Refinancing changes interest and cash invested; see cash-out refinance taxes. More tools on the calculators page, including the rental cash flow calculator.