1. What is Rental Income Tax?

Rental income tax is the federal tax on income generated from renting out property. In the US, rental income is generally treated as ordinary income and taxed at your marginal tax rate (10-37%).

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Rental\ Income \) — Total gross rent received
• \( Allowances \) — Deductions like depreciation
• \( Expenses \) — Deductible rental expenses
• \( Federal\ Tax\ Rate \) — Your marginal tax rate (10-37%)

Explanation: The calculator first determines your taxable rental income by subtracting allowances and expenses from gross rent, then applies your tax rate.

3. Importance of Rental Tax Calculation

Details: Accurate tax calculation helps with tax planning, estimated payments, and avoiding underpayment penalties. Rental income must be reported on Schedule E of your tax return.

4. Using the Calculator

Tips: Enter all amounts in USD. Include all deductible expenses like maintenance, property taxes, mortgage interest, and depreciation. Use your marginal tax rate (not effective rate).

5. Frequently Asked Questions (FAQ)

Q1: What counts as rental income?
A: All payments received for use or occupation of property, including rent, advance rent, security deposits kept, and services received instead of rent.

Q2: What expenses are deductible?
A: Mortgage interest, property tax, operating expenses, depreciation, repairs, insurance, and other expenses for managing the property.

Q3: Is depreciation mandatory?
A: Yes, even if you don't claim it, IRS requires you to reduce basis by allowable depreciation when calculating gain/loss on sale.

Q4: What if I show a loss?
A: Rental losses may be deductible against other income if you qualify as a real estate professional, otherwise they're typically carried forward.

Q5: Are state taxes included?
A: No, this calculator only estimates federal tax. Most states also tax rental income, so check your state's tax rates.