Rental Property Tax Calculator
Build a Schedule E result from rent, operating costs, interest, and 27.5-year depreciation — then see whether the resulting loss is one you can actually use.
Schedule E rental estimator
Rent is not self-employment income
The single largest difference between a rental and a business is the tax that is not charged. Rental income on Schedule E carries no Social Security or Medicare tax. A self-employed consultant netting $30,000 pays roughly $4,240 in self-employment tax before any income tax. A landlord with $30,000 of net rental income pays none of it.
That 15.3% difference is often larger than the entire income tax bill on the same property. It is also the reason rental income should never be funnelled onto Schedule C without a specific reason — doing so creates a liability that did not exist.
The exception is narrow but real. A short-term rental with substantial services — daily cleaning, linens, front-desk staffing — is treated as a trade or business rather than an investment, and the material participation rules change the treatment of losses as well as the self-employment question.
The 27.5-year clock, and why land sits outside it
Residential rental property is depreciated straight-line over 27.5 years. Note that a home office in the same building is 39-year nonresidential property — the two rates coexist inside one house, which is why a mixed-use calculation has to split the basis before it splits anything else.
Only the structure depreciates. Land never does. The purchase price has to be allocated, and the allocation is not optional or cosmetic: on a $350,000 property with a 20% land share, the depreciable basis is $280,000 and the annual deduction is $10,182. Using the full $350,000 instead would overstate the deduction by $2,545 a year, and the error compounds into a larger recapture bill when the property sells.
Two sources settle the split: the county assessor's own land and improvement breakdown, or an appraisal. The assessor's ratio, applied to your purchase price, is the conventional starting point because it is defensible and free.
Improvement or repair decides the year, not the amount
A repair is deducted in the year paid. An improvement is capitalised and recovered over 27.5 years. A $12,000 roof replacement produces a $436 annual deduction, not a $12,000 one — a difference of $11,564 in the first year's taxable income.
Tenant turnover is where this gets decided most often. Paint, cleaning, a replaced faucet, patching drywall between tenants: repairs. New flooring, new cabinets, a renovated bathroom: improvements, unless the small-taxpayer safe harbour is elected, which allows a per-item or per-building expense election up to a threshold and requires an election on a timely filed return.
The paper loss, and the allowance that limits it
Because depreciation is a deduction without a cash outlay, a rental can show positive cash flow and a taxable loss at the same time. That is not a trick — it reflects genuine economic wear on the building — but whether the loss is usable depends entirely on your income.
A taxpayer who actively participates in the rental can deduct up to $25,000 of rental losses against other income. That allowance phases out by 50 cents for every dollar of modified adjusted gross income above $100,000, and reaches zero at $150,000. For married filing separately the thresholds halve, and the allowance disappears at $75,000.
Two consequences are commonly missed. Real estate professionals who meet the 750-hour and material participation tests are exempt from the passive loss rules altogether and can deduct losses without the $25,000 ceiling. And a disallowed loss is not lost — it suspends and carries forward until you have passive income to absorb it, which usually means the year you sell.
The 14-day rule, if you also use the property
A dwelling unit rented for fewer than 15 days in the year is not treated as a rental at all. The income is excluded and no rental expenses are deductible, but the mortgage interest and property tax remain deductible as itemised deductions. For a homeowner renting out a room for one event weekend, that is usually the best available outcome.
Once you cross 15 days, the property enters the rental system and expenses must be allocated between rental and personal use by days. Personal-use days above the greater of 14 or 10% of rental days can push the property into a mixed-use category where the loss deduction is barred entirely, regardless of income.
Section 199A: worth checking, easy to fail
A rental that rises to the level of a trade or business can qualify for the 20% qualified business income deduction, which the 2025 law made permanent. The practical test most landlords rely on is the safe harbour requiring 250 or more hours of rental services in the year, documented contemporaneously in a log, with separate books and a separate bank account.
Failing the safe harbour does not automatically disqualify the activity, but it moves the argument onto facts that are harder to prove. A landlord who spends three weekends a year on the property should not assume the deduction is available; one who self-manages a dozen units almost certainly qualifies and should be claiming it.
Frequently asked questions
Do I pay self-employment tax on rental income?
Generally no. Investment rental income is passive and reported on Schedule E, outside the 15.3% self-employment tax. A short-term rental with substantial services such as daily cleaning can be treated as a trade or business, which changes that.
Why is rental depreciation 27.5 years but a home office 39?
Residential rental property has a 27.5-year recovery period; nonresidential real property, which includes a home office, is 39 years. In a house used for both, the basis has to be split before either rate applies.
Can I depreciate the land?
No. Land is never depreciable. Use the county assessor's land-to-improvement split or an appraisal to allocate the purchase price, and depreciate only the structure's share.
What is the $25,000 passive loss allowance?
An active participant can offset up to $25,000 of rental losses against other income. It phases out at 50 cents per dollar of MAGI above $100,000 and is gone at $150,000. Disallowed losses carry forward.
Is a new roof a repair or an improvement?
An improvement, capitalised over 27.5 years — about $436 a year on a $12,000 roof. Patching a leak is a repair and is deducted when paid.
Does renovating between tenants count as a repair?
Usually not, if it goes beyond ordinary wear. Paint and minor fixes are repairs; flooring, cabinets, and bathroom replacements are improvements, unless the small-taxpayer safe harbour is elected.
Can a rental get the 20% QBI deduction?
Sometimes. The activity must be a trade or business, and the common safe harbour is 250 or more documented hours of rental services. Meeting it makes the section 199A deduction available; the deduction is permanent under current law.
Disclaimer: This calculator estimates a federal income tax effect for general information and is not tax, legal, or financial advice. It does not model the alternative minimum tax, state income tax, depreciation conventions for the first year of service, cost segregation, or the real estate professional rules. Confirm with IRS Publication 527, the Schedule E instructions, and a licensed tax professional.
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