2026 tax year
Rental income tax calculator
Depreciation is the deduction that makes rental income look larger on paper than it costs in tax.
Rental income is taxed on the profit, not the rent. Mortgage interest, property tax, insurance, repairs, and, quietly the largest, depreciation all come off first. A simple rental is Schedule E with no self-employment tax; a short-term rental where you provide substantial services (an Airbnb with cleaning and concierge) is Schedule C and owes SE tax. This works out both.
Depreciated over 27.5 years.
Enter your rent and expenses.
Worked example, $48,000 of rent
A landlord collects $48,000 on a property with a $275,000 building basis, and $80,000 of other income:
| Line | Amount |
|---|---|
| Gross rent | $48,000 |
| Depreciation (basis ÷ 27.5) | − $10,000 |
| Total expenses incl. depreciation | − $31,300 |
| Net rental income | $16,700 |
| Income tax on the rental | − $4,133 |
| After-tax rental income | $12,567 |
The $10,000 of depreciation shelters that much rent from tax without costing a dollar of cash, which is why real estate is tax-favored. But it is recaptured (taxed) when you sell, so it is a deferral, not a free lunch. On Schedule E there is no self-employment tax; the $16,700 of profit is taxed at ordinary rates only.
Questions
How is rental income taxed?
On net profit, rent minus deductible expenses and depreciation, at your ordinary income rate. Most rentals are Schedule E, which is not subject to the 15.3% self-employment tax. That is a major advantage over active self-employment income.
What is depreciation and why does it matter?
You deduct the building's cost (not the land) over 27.5 years for residential rental property, about 3.6% a year. It offsets rent you actually received, so a cash-flow-positive rental can show little or no taxable income. It is recaptured at up to 25% when you sell, so plan for that.
When is a rental Schedule C instead of Schedule E?
When you provide substantial services beyond basic rental, daily cleaning, meals, a concierge, as some short-term Airbnb-style rentals do. Then it is a business on Schedule C and owes self-employment tax on the profit. A plain long-term lease is almost always Schedule E.
Can I deduct a rental loss?
Sometimes. Rental losses are passive and generally offset only passive income, but there is a special allowance of up to $25,000 for active participants below an income limit, and real-estate professionals are exempt from the passive rules. Disallowed losses carry forward.
Related tools
- Rental host tax calculator by platform
- Capital gains calculator selling the property
- 1099 tax calculator for Schedule C rentals
Estimate for the 2026 tax year. Depreciation recapture and passive-loss limits apply on sale and at a loss. Not tax advice.