Rental Income Calculator
This rental income calculator shows how much income a rental property really brings in. Enter your rent, vacancy rate, and expenses in the calculator above.
It turns gross rent into effective income after vacancy, then into net operating income after costs. Gross rent is only the starting point, not your spendable or taxable income.
How it's calculated
The rental income calculator works in three steps. First, it finds gross annual rent by multiplying monthly rent by 12. Next, it subtracts a vacancy allowance to get effective gross income, the real top line. Finally, it subtracts operating expenses like taxes, insurance, maintenance, and management to reach net operating income (NOI).
Here is the key insight. Gross rent is not what you keep or what you owe tax on. The IRS taxes rental income but lets you deduct expenses and depreciation. So your taxable income is usually far lower than the rent you collect.
A worked example
Take a single-family rental bought for $300,000 with 25% down. It rents for $2,700 a month, so gross annual rent is $32,400.
After a 6% vacancy allowance, effective gross income drops to $30,456. Operating expenses (taxes, insurance, maintenance, and management) total $10,184 a year.
That leaves net operating income of $20,272. After the $1,497 monthly mortgage payment, monthly cash flow is $192, or $2,309 a year.
Common mistakes to avoid
- Treating gross rent as profit. Effective gross income after vacancy, then NOI after expenses, is what matters.
- Ignoring vacancy. Even a 6% vacancy rate cuts a $32,400 gross rent down to $30,456 in effective income.
- Forgetting management and maintenance. Budgeting 8% of rent for each keeps your numbers honest.
- Confusing rent collected with taxable income. The IRS lets you deduct operating expenses and depreciation.
- Leaving out depreciation. Residential rental property depreciates over 27.5 years, lowering your tax bill.
Frequently asked questions
What does a rental income calculator tell you?
A rental income calculator tells you gross rent, effective income after vacancy, and net operating income after expenses. It separates the rent you collect from the income you actually keep. In the example above, $32,400 in gross rent becomes $20,272 in net operating income.
Is gross rent the same as taxable rental income?
No. Gross rent is not your taxable income. The IRS taxes rental income but lets you deduct operating expenses and depreciation. Because residential property depreciates over 27.5 years, your taxable income is often much lower than the rent you collect.
What counts as rental income to the IRS?
Rental income is any payment you receive for the use of property. This includes normal rent, advance rent, lease cancellation payments, and tenant-paid expenses. Security deposits count only if you keep them for a lease violation.
What expenses can I deduct from rental income?
You can deduct ordinary expenses like maintenance, insurance, property taxes, mortgage interest, and management fees. You can also deduct depreciation. These deductions reduce your taxable rental income below the rent you collect. To see the profit after the mortgage, use the cash flow calculator.