Rental Property Tax Calculator
Cash Flow Breakdown
This rental property tax calculator turns a property's rent, expenses, and financing into an after-tax cash flow number by layering in the deductions that actually move the needle for landlords: depreciation, mortgage interest, the Section 199A QBI deduction, and the passive activity loss rules under IRC §469. It also lets you toggle a cost segregation election to see how front-loaded depreciation changes your taxable income and cash-on-cash return.
Formula
Taxable income = rent − operating expenses − mortgage interest − depreciation; After-tax CF = pre-tax CF − tax
- depreciation
- First-year depreciation: 27.5-year MACRS, or accelerated 5/7/15-year with bonus if cost seg is elected
- mortgage interest
- Year-one interest portion summed across the 12 monthly amortized payments
- pre-tax CF
- Net operating income − annual mortgage payment (principal + interest)
- tax
- Taxable income (less QBI deduction) × marginal bracket, or a benefit from deductible passive losses when income is negative
How it works
- Enter the purchase price, down payment percentage, and land value percentage. The tool derives the loan amount, the depreciable building cost, and your cash invested.
- Add annual rental income, operating expenses, the mortgage rate and term. It computes net operating income, the annual mortgage payment, and the first-year mortgage interest portion.
- Choose depreciation treatment (standard 27.5-year MACRS or a cost segregation election with bonus depreciation), your filing status, AGI, and marginal bracket. The calculator nets depreciation and interest against income, applies QBI and passive-loss rules, and reports after-tax cash flow and cash-on-cash return.
Worked examples
A $300,000 rental, 25% down, 20% land, $30,000 rent, $9,000 expenses, a 7% 30-year loan, 24% bracket, MFJ, $120,000 AGI, standard depreciation, 199A eligible.
- Loan = 300,000 × 75% = $225,000; depreciable building = 300,000 × 80% = $240,000; cash invested = $75,000.
- NOI = 30,000 − 9,000 = $21,000; annual mortgage ≈ $17,963, so pre-tax cash flow ≈ $3,037.
- First-year 27.5-yr MACRS on $240,000 ≈ $4,727; year-one interest ≈ $15,640; taxable income ≈ −$367, near break-even.
- With a small QBI deduction and 24% bracket, tax is roughly $114, so after-tax cash flow ≈ $2,922.
After-tax cash flow is about $2,922 per year, an after-tax cash-on-cash return of roughly 3.9% on the $75,000 invested.
The same property with a cost segregation election instead of straight 27.5-year depreciation.
- Cost seg splits the $240,000 building into 12% 5-yr, 3% 7-yr, 5% 15-yr, 80% long-life and applies 100% bonus to the short-life buckets.
- First-year depreciation jumps to about $51,781, well above the $4,727 standard figure.
- Taxable income goes deeply negative, but the passive activity loss is suspended here because AGI of $120,000 falls in the $100k–$150k phase-out band.
Depreciation rises to about $51,781, yet because the loss is passive and AGI sits in the phase-out range, after-tax cash flow stays near $3,037 with the excess loss carried forward.
Frequently asked questions
- How is rental property depreciation calculated?
- Residential rental buildings (excluding land) depreciate over 27.5 years using MACRS with a mid-month convention. This calculator depreciates the building portion only and, if you elect cost segregation, reclassifies parts into 5-, 7-, and 15-year property eligible for bonus depreciation.
- What is the Section 199A QBI deduction for rentals?
- Section 199A can let qualifying rental activity deduct up to 20% of its qualified business income. The benefit phases out above $191,950 (single) or $383,900 (married filing jointly) for 2024, where W-2 wage and property-basis limits begin to apply.
- Why might my rental loss not reduce my taxes?
- Rental losses are generally passive. Active participants can deduct up to $25,000 against other income, but that allowance phases out between $100,000 and $150,000 of AGI and disappears above it. Disallowed losses are suspended and carried forward to future years.
- Does this calculator account for principal paydown or appreciation?
- No. It focuses on first-year taxable income and after-tax cash flow. Equity build from principal paydown and any property appreciation are wealth gains that fall outside this single-year tax cash-flow model.