How the estimate works
Taxable rental profit is gross rental income minus the entered operating expenses, mortgage interest, and depreciation. That profit is stacked on top of your other taxable income and run through the 2026 ordinary federal brackets. Cash flow instead subtracts operating expenses and total mortgage payments, then subtracts the estimated federal tax.
Official tax sources
IRS Publication 527 explains residential rental income, expenses, depreciation, and loss limitations. The IRS NIIT guide explains the 3.8% tax and its MAGI thresholds.
The ordinary rates use the IRS inflation adjustments published in Internal Revenue Bulletin 2025-45.
Important limitations
- Assumes the property is rented at fair value and the entered amounts are fully allocable to rental use.
- Does not determine passive-activity loss deductibility, active participation, material participation, at-risk limits, basis limits, qualified business income, personal-use allocation, or short-term rental treatment.
- Does not calculate depreciation, depreciation recapture, state or local tax, credits, alternative minimum tax, or tax return adjustments.
- NIIT is optional because whether rental profit is net investment income depends on facts beyond these inputs.
Frequently asked questions
Is mortgage principal deductible from rental income?
No. Mortgage principal reduces cash flow but is not a rental expense deduction. Mortgage interest may generally be deductible when it is properly allocable to the rental activity.
Why is taxable profit different from cash flow?
Depreciation reduces taxable rental profit without a current cash payment. Mortgage principal reduces cash flow but does not reduce taxable profit.
Can a rental loss reduce my other income?
Sometimes, but passive-activity, at-risk, basis, personal-use, and special allowance rules can limit or suspend a loss. This calculator reports a potential loss without applying it against other income.
When does the 3.8% NIIT apply?
NIIT can apply to rental income that is net investment income when modified AGI exceeds the statutory filing-status threshold. Material participation and trade-or-business rules can affect whether rental income is included.