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Rental Income Tax Formula:
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Rental income tax is the tax you pay on income earned from renting out property. For 2024, the standard deduction is $14,600 for single filers, which can be subtracted from your gross rental income along with deductible expenses before calculating your tax liability.
The calculator uses the following formula:
Where:
Explanation: The calculator first subtracts the standard deduction and expenses from your rental income to determine taxable income, then applies your tax rate.
Details: Accurate rental income tax calculation helps with budgeting, quarterly tax payments, and avoiding underpayment penalties. It also helps evaluate the true profitability of rental properties.
Tips: Enter your total rental income, standard deduction ($14,600 for 2024), deductible expenses (maintenance, repairs, etc.), and your applicable tax rate. All values must be positive numbers.
Q1: What expenses are deductible?
A: Common deductible expenses include mortgage interest, property taxes, insurance, repairs, maintenance, utilities, and property management fees.
Q2: Is the standard deduction the same for everyone?
A: No, the $14,600 is for single filers in 2024. Married filing jointly is $29,200, and heads of household get $21,900.
Q3: What if my expenses exceed my rental income?
A: You may have a rental loss, which might be deductible against other income, subject to passive activity loss rules.
Q4: Should I use actual expenses or the standard deduction?
A: You should compare both methods and use whichever gives you the greater tax benefit. Most rental property owners benefit from itemizing.
Q5: Are security deposits taxable?
A: Security deposits are not taxable when received, but become taxable if you keep them to cover unpaid rent or damages.