1. What is Rental Income Tax?

Rental income tax is the tax payable on profits from renting out property. The taxable amount is calculated by subtracting allowable expenses from gross rental income.

2. How Does the Calculator Work?

The calculator uses the rental income tax formula:

Where:

• Gross Rental Income — Total rental income before expenses
• Allowable Expenses — Deductible costs associated with renting the property

Explanation: This calculation determines the net taxable income from rental properties that will be subject to income tax.

3. Importance of Accurate Calculation

Details: Proper calculation ensures you pay the correct amount of tax and claim all eligible deductions, avoiding penalties or overpayment.

4. Using the Calculator

Tips: Enter your total rental income and all allowable expenses in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What counts as gross rental income?
A: All payments received from tenants including rent, cleaning fees, and any other charges specified in the lease.

Q2: What are common allowable expenses?
A: Mortgage interest, property taxes, insurance, maintenance, utilities, property management fees, and depreciation.

Q3: Are security deposits taxable income?
A: Only if kept due to lease violations. Normal deposits returned to tenants are not taxable.

Q4: Can I deduct home improvements?
A: Improvements must be capitalized and depreciated, while repairs can be fully deducted in the year they occur.

Q5: How does this differ from capital gains tax?
A: Rental income tax is annual, while capital gains tax applies when you sell the property.