How much tax do you pay on rental income? Calculate your net rental income, depreciation deductions, and estimated tax owed — including the 3.8% Net Investment Income Tax (NIIT) where applicable.
Tax laws change frequently and vary by jurisdiction. This calculator provides estimates based on 2025 federal tax rules for informational purposes only. It does not constitute professional tax advice. Consult a qualified CPA or tax attorney for your specific situation. Depreciation recapture, passive activity loss rules, and state/local taxes are not fully captured here.
Rental income is generally taxed as ordinary income at your marginal federal tax rate (10%–37%). You report it on Schedule E (Form 1040). After subtracting allowable deductions — including mortgage interest, property taxes, insurance, repairs, management fees, and depreciation — the net amount flows to your Form 1040 and is added to your other income. If your AGI exceeds $200,000 (single) or $250,000 (married filing jointly), rental income may also be subject to the 3.8% Net Investment Income Tax (NIIT).
Yes. Residential rental property is depreciated over 27.5 years using the straight-line method. Only the building value (not land) is depreciable. For example, if you buy a property for $350,000 and the land is worth 20% ($70,000), your depreciable basis is $280,000. Annual depreciation = $280,000 / 27.5 = $10,182. Depreciation is a non-cash deduction that can significantly reduce your taxable rental income, though it may be subject to recapture (taxed as ordinary income up to 25%) when you sell the property.
Common deductible expenses for rental properties include:
The Net Investment Income Tax (NIIT) is an additional 3.8% tax that applies to the lesser of your net investment income or the amount by which your modified adjusted gross income (MAGI) exceeds a threshold. For 2025, those thresholds are:
Rental income is generally considered investment income for NIIT purposes. If your AGI exceeds the threshold for your filing status, the 3.8% surtax applies to your net rental income (or the excess over the threshold, whichever is smaller).
Yes, rental real estate activities are generally treated as passive activities by the IRS, regardless of whether you materially participate. This means rental losses can only offset other passive income (not wages or portfolio income) unless you qualify as a real estate professional. However, there's a special $25,000 passive activity loss allowance for active participants with AGI under $100,000 (phases out between $100K–$150K). This calculator does not automatically apply the PAL rules — consult a tax professional to determine if your losses are limited.
Generally, no. Rental income from real estate is not subject to self-employment tax (Social Security and Medicare) because it is considered passive investment income rather than earned income. However, there are two important exceptions: (1) If you provide substantial services to tenants (like a hotel or bed-and-breakfast), the income may be treated as active business income subject to SE tax. (2) If you are a real estate dealer or developer who rents properties as part of a trade or business, the income may be subject to SE tax. For most residential landlords, rental income is not SE tax liable.