1. What is Rental Income Tax?

Rental income tax is the federal tax you pay on income generated from renting out property. The taxable amount is calculated after deducting allowable expenses and depreciation from your gross rental income.

2. How the Calculator Works

The calculator uses the following formula:

Where:

• Rental Income — Total rent received (gross amount)
• Allowances — Depreciation and other allowances
• Expenses — Deductible expenses like repairs, insurance, etc.
• Federal Tax Rate — Your marginal tax rate (10-37%)

3. Understanding Rental Taxation

Details: Rental income is considered ordinary income by the IRS. You can deduct operating expenses, depreciation, and other costs to reduce your taxable rental income.

4. Using the Calculator

Tips: Enter your total rental income, any allowances (like depreciation), deductible expenses, and your federal tax bracket. The calculator will estimate your federal tax liability.

5. Frequently Asked Questions (FAQ)

Q1: What expenses can I deduct?
A: Common deductions include mortgage interest, property tax, operating expenses, repairs, insurance, and depreciation.

Q2: How is depreciation calculated?
A: Residential properties depreciate over 27.5 years. Divide property value (excluding land) by 27.5 for annual depreciation.

Q3: What if my rental shows a loss?
A: Rental losses may be deductible against other income, subject to passive activity loss rules and income limits.

Q4: Do I need to pay estimated taxes?
A: If you expect to owe $1,000+ in tax, you generally need to make quarterly estimated tax payments.

Q5: Are state taxes included?
A: No, this calculator only estimates federal tax. State tax rates vary and may apply to rental income.