Rental Property Calculator 2026

Q: How does rental property depreciation work in 2026?

Residential rental property is depreciated over 27.5 years (straight-line, building value only). Under OBBBA (2026), 100% bonus depreciation is permanently restored for eligible components identified through a cost segregation study — typically 15-25% of building value can be deducted in year 1.

Q: What is the QBI deduction for rental income?

Section 199A allows a 20% deduction on net rental income. Made permanent by OBBBA. Full deduction if taxable income is below $203,000 (single) or $406,000 (MFJ). Above those thresholds, phases out over $75K/$150K and becomes limited to W-2 wages and property basis tests.

Q: Can I deduct rental losses against my W-2 income?

Up to $25,000 of rental losses deductible against W-2 income if MAGI ≤ $100,000. Phases out $100K-$150K. Real Estate Professionals (750+ hours/year) can deduct unlimited rental losses — especially powerful with cost segregation.

Q: What taxes do I pay when I sell a rental property?

Three taxes: depreciation recapture (25% max), long-term capital gains (0%/15%/20%), and NIIT (3.8% if MAGI > $200K/$250K). All can be deferred via 1031 Exchange (preserved under OBBBA).

Q: What's a good cap rate and cash-on-cash return?

Cap rate: 4-6% coastal, 6-10% Midwest/South, 10%+ rural. Cash-on-cash: 8-12% considered good. DSCR: lenders require 1.25+. Many investors accept lower cash-on-cash in appreciation markets.

Cash flow, cap rate, total return — with depreciation, QBI, cost segregation, and exit tax analysis.

Purchase price

Down payment

Investment property: 20-25% typical

Monthly rent (total)

All units combined

Mortgage rate

Investment: ~6.75-7.50% (Mar 2026)

Loan term (years)

Vacancy rate

5% typical, 8-10% conservative

Property tax rate

Of property value/year

Insurance (annual)

Maintenance

% of property value/year

Management fee

% of effective rent. 0% if self-managed

HOA (monthly)

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How to Use This Calculator

Tab "Cash Flow Analysis"

Enter your purchase price, down payment, monthly rent, and expenses (property tax, insurance, maintenance, vacancy, management). The calculator shows your Net Operating Income (NOI), monthly cash flow, cap rate, cash-on-cash return, DSCR, and GRM. In "More options," adjust the mortgage rate and loan term. A DSCR below 1.0 means the property doesn't cover its debt — lenders typically require 1.25+.

Tab "Max Purchase Price"

The reverse calculator. Enter your target monthly cash flow, expected rent, and expense assumptions. The calculator finds the maximum purchase price that achieves your target cash flow, then shows a sensitivity table — how price changes with different rent levels and interest rates. Use this before shopping to know your walk-away number.

Tab "Tax & Total Return"

The full picture. Enter the same property details plus your taxable income and filing status. The calculator computes depreciation (27.5-year straight-line + optional cost segregation with 100% bonus depreciation under OBBBA), QBI deduction (§199A, $203K/$406K thresholds), passive activity loss rules, and a year-by-year analysis. The exit scenario shows depreciation recapture (25%), LTCG, NIIT, and your annualized total ROI including appreciation, cash flow, equity paydown, and tax savings.

The Formulas

Net Operating Income (NOI):
NOI = Gross Rent − Vacancy − Property Tax − Insurance − Maintenance − Management

Cash Flow:
Cash Flow = NOI − Annual Mortgage Payment
Monthly mortgage = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]

Key Metrics:
Cap Rate = NOI / Purchase Price
Cash-on-Cash Return = Annual Cash Flow / Total Cash Invested
DSCR = NOI / Annual Debt Service
GRM = Purchase Price / Annual Gross Rent

Depreciation (2026 post-OBBBA):
Building value = Purchase Price − Land (typically 15-25%, varies by market — check county appraisal)
Straight-line: Building / 27.5 years
Cost segregation + 100% bonus depreciation (OBBBA §70301): eligible components (5/7/15-year) deducted in year 1
Typical cost seg allocation: 15-25% of building value

QBI Deduction (§199A, permanent under OBBBA):
Taxable income ≤ $203,000 (single) / $406,000 (MFJ): full 20% of net rental income
Phase-out: $203K–$278K (single) / $406K–$556K (MFJ)
Above phase-out: limited to greater of 50% of W-2 wages or 25% W-2 + 2.5% property basis

Passive Activity Loss (PAL):
Up to $25,000 deductible if MAGI ≤ $100,000
Phase-out: $100K–$150K MAGI (lose $1 for every $2 over $100K)
Real estate professional: unlimited deduction (750+ hours/year)

Exit Tax (Sale):
Depreciation recapture: 25% max rate (§1250)
Remaining gain: LTCG rate (0%/15%/20%) + 3.8% NIIT if MAGI > $200K/$250K
1031 Exchange: defers ALL tax (preserved under OBBBA, no changes)

Investment mortgage rates (March 2026): ~6.75-7.50% for investment property (typically 0.50-0.75% above primary residence rates). Lenders require 20-25% down for investment properties.

Example

Marcus — Software Engineer, Age 34, Houston, $130K Salary, First Rental Property

Buying a duplex for $320,000, putting 25% down ($80,000). Renting both units for $2,800/month total. Plans to hold for 10 years with 3% annual appreciation.

Purchase price$320,000

Down payment (25%)$80,000

Loan amount$240,000

Mortgage rate / term7.0% / 30 years

Monthly rent (both units)$2,800

Monthly expenses (tax + insurance + maint + mgmt)~$1,050

Vacancy (5%)$140/mo

NOI~$19,320/yr

Monthly mortgage payment~$1,597

Monthly cash flow~$13

Cap rate6.0%

Cash-on-cash return (year 1)~0.2%

Year 1 depreciation (straight-line)~$8,727

Tax savings at 22% bracket~$1,920

Estimated sale price (year 10, 3% appreciation)~$430,000

Total return (10-year, including appreciation + equity + tax)~$220,000

Marcus barely breaks even on monthly cash flow, but the total return tells the real story: $110K in appreciation, $45K in equity paydown, $87K in depreciation deductions, and a QBI deduction each year. His annualized ROI on the $80K invested is ~11% when including all return components. The tax benefits alone are worth ~$2,000/year.

Frequently Asked Questions

How does rental property depreciation work in 2026?▼

Residential rental property is depreciated over 27.5 years using the straight-line method. You depreciate the building value only (not land — typically 15-25% of purchase price, check your county appraisal). Under the OBBBA (2026), 100% bonus depreciation is permanently restored for eligible components identified through a cost segregation study. This means 15-25% of your building value (appliances, fixtures, landscaping, parking lots) can be deducted in year 1 instead of spread over 27.5 years. A cost seg study costs $3,000-$7,000 but can generate $15,000-$50,000+ in first-year deductions for a $300K+ property.

What is the QBI deduction for rental income?▼

Section 199A allows a 20% deduction on qualified business income, including net rental income. Made permanent by OBBBA. If your taxable income is below $203,000 (single) or $406,000 (MFJ), you get the full 20% deduction with no additional requirements. Above those thresholds, the deduction phases out over $75K/$150K and becomes limited to the greater of 50% of W-2 wages paid or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property. For most individual landlords earning under $203K/$406K, this is a straightforward 20% deduction that reduces your effective tax rate on rental income.

Can I deduct rental losses against my W-2 income?▼

It depends on your income. Under the Passive Activity Loss (PAL) rules, you can deduct up to $25,000 of rental losses against non-passive income (like W-2 wages) if your MAGI is $100,000 or less. The allowance phases out between $100K and $150K ($1 lost for every $2 over $100K), reaching zero at $150K. If you qualify as a Real Estate Professional (750+ hours/year in real estate activities, more than any other job), rental losses become fully deductible with no limit. This is why many high-income investors' spouses get their real estate license — to qualify for REP status and unlock unlimited deductions, especially powerful with cost segregation.

What taxes do I pay when I sell a rental property?▼

Three potential taxes: (1) Depreciation recapture at a maximum 25% rate on all depreciation claimed (§1250). If you claimed $80K in depreciation over 10 years, you owe up to $20K in recapture tax. (2) Long-term capital gains tax (0%/15%/20%) on the remaining profit above your adjusted basis. (3) Net Investment Income Tax (NIIT) of 3.8% if your MAGI exceeds $200K (single) or $250K (MFJ) — these thresholds are NOT indexed for inflation. You can defer ALL of these taxes through a 1031 Exchange by reinvesting into a like-kind property within 180 days (preserved under OBBBA, no changes).

What's a good cap rate and cash-on-cash return?▼

It depends on the market and your strategy. Cap rate (NOI / purchase price): 4-6% in expensive coastal markets (SF, NYC, LA), 6-10% in the Midwest and South (Houston, Memphis, Indianapolis), 10%+ in rural or high-risk areas. Cash-on-cash return (annual cash flow / cash invested): 8-12% is considered good for a leveraged rental property. However, many investors accept 2-5% cash-on-cash in appreciation markets, banking on property value growth. DSCR (debt service coverage ratio): lenders typically require 1.25+, meaning NOI is 25% above the mortgage payment. A DSCR below 1.0 means you're feeding the property from your paycheck — acceptable only if appreciation and tax benefits justify it.

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