Rental Property Tax Calculator

By Tom, CPA · Updated October 27, 2026

TL;DR: Enter rent, expenses, building basis and income. The calculator estimates straight-line 27.5-year depreciation, net Schedule E income or loss, the part of a loss usable under the $25,000 special allowance (phased out between $100,000 and $150,000 of MAGI), and the federal tax effect at your marginal rate.

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.

Most rentals that break even on cash show a tax loss on paper, because depreciation is a real deduction with no check written. Whether that loss saves you anything this year depends on the passive activity rules. This calculator puts the pieces together for one property in one typical year.

CPA Warning Label: This is a simplified annual estimate. It ignores the mid-month convention in the first year, state tax, the 3.8% NIIT, real estate professional status and short-term rental rules. Losses suspended now come back later.

How the calculator works

1. Depreciation is the building basis divided by 27.5, the recovery period for residential rental property under the general depreciation system (IRS Publication 527 and Publication 946). Land is never depreciated, so enter only the building portion of the cost plus improvements.
2. Net rental income is rent minus mortgage interest, property tax, insurance, other expenses and depreciation. Principal payments are not deductible and are not included.
3. Loss allowed now: if the result is a loss and you actively participate, up to $25,000 can offset other income. The allowance drops by 50 cents for each dollar of MAGI above $100,000 and is gone at $150,000 (IRS Publication 925). Married filing separately has different rules not modeled here.
4. Suspended loss is the remainder, carried forward to offset future passive income or released on a fully taxable sale.
5. Tax effect is net income times your marginal rate, or the negative of the usable loss times your rate.

Illustration

Illustration: Using the default inputs: rent $24,000; interest $9,000; property tax $3,000; insurance $1,200; other $3,000; building basis $220,000; MAGI $90,000.

• Depreciation: $220,000 / 27.5 = $8,000.
• Net: $24,000 - $16,200 - $8,000 = -$200, a $200 loss.
• MAGI is under $100,000, so the full $25,000 allowance is available, and the $200 loss is usable now.
• Tax effect at 22%: -$44, a small saving.

Change MAGI to $130,000 and rent to $12,000: the loss is $12,200, the allowance is $25,000 - ($30,000 x 50%) = $10,000, so $10,000 is usable now and $2,200 is suspended. At $160,000 of MAGI, none is usable now and the whole $12,200 is suspended.

What the numbers mean

A positive net income is taxed as ordinary income; rental income is generally not subject to self-employment tax (Publication 527). A loss within the allowance reduces tax on wages or other income this year. A suspended loss is not lost. It accumulates and is used against future passive income from any passive activity, or in full when you sell the property in a fully taxable transaction (Publication 925).

Depreciation also reduces your basis. When you sell, depreciation allowed or allowable is taxed as unrecaptured Section 1250 gain at up to 25% (IRS Topic 409). The yearly saving is real, but part of it is a deferral, not a permanent exclusion. Use the depreciation recapture calculator to see the exit side.

Inputs to get right

• Building basis: purchase price plus capitalized closing costs and improvements, minus the land value. A county assessor ratio is a common, defensible way to split land and building.
• MAGI for the allowance is generally AGI figured without passive losses, IRA deductions and certain other items (Publication 925).
• Active participation means you own at least 10% and make management decisions such as approving tenants and setting rent. It is a lower bar than material participation.
• Marginal rate: your top federal bracket. 2026 brackets are 10%, 12%, 22%, 24%, 32%, 35% and 37% (IR-2025-103).

Limits of this estimate

The model is intentionally simple. It does not handle the first-year mid-month convention, improvements on shorter lives, bonus depreciation from a cost segregation study, multiple properties sharing one allowance, real estate professional status, short-term rentals with average stays of 7 days or less, the 3.8% net investment income tax, or state tax. If any of those apply, the real answer can differ a lot. A tax professional can run the full return.