Example Result
Sample DataBased on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.
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Income Tax Rate Formula
User Input (%)
Where to Find This Value
Here's where you can find the value for Income Tax Rate:
Tax Return
Your most recent tax return shows your effective federal + state marginal rate
CPA / Accountant
Your accountant can calculate your exact marginal tax rate for rental income
IRS Tax Brackets
IRS publishes current federal tax brackets; add your state rate for total
Used to Calculate
Income Tax Rate is used as an input for these calculations:
Platform Distribution
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Unlock Rental Property CalculatorWhy It Matters
Your income tax rate determines the gap between Cash Flow Before Tax and Cash Flow After Tax. At a 24% rate, $10,000 of taxable rental income costs $2,400 in taxes. However, depreciation often creates a "paper loss" that shelters rental income from taxes in the early years of ownership, making the effective tax rate on cash flow near zero.
Detailed Explanation
Income Tax Rate is your marginal federal (and state, if applicable) income tax rate applied to taxable rental income. Rental income is taxed as ordinary income after deducting operating expenses, mortgage interest, and depreciation. Most rental property investors fall in the 22–37% federal bracket. The effective tax on rental income is often much lower than the marginal rate due to depreciation and interest deductions.
Example
Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.
Related Calculations
Annual Depreciation
2Annual straight-line depreciation deduction for the building.
Monthly Depreciation
2Monthly depreciation deduction.
Depreciation as Percent of Income
2Annual depreciation as a percentage of effective gross income.
Tax Savings From Depreciation
UDollar amount saved in taxes due to depreciation deduction.
Cash Flow from Depreciation™
UAdditional effective cash flow generated by depreciation tax savings.
Effective Tax Rate
WEstimated income tax as a percentage of NOI.
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