Taxed at ordinary rates on net profit
Rental income is taxed at your ordinary income tax rate, but only on your net profit — rent received minus deductible expenses and depreciation. It is not subject to Social Security and Medicare (self-employment) tax for a typical landlord.
Where you report it
You report rental income and expenses on Schedule E. Depreciation frequently reduces the taxable figure to near zero even when the property produces positive cash flow, which is why paper losses are common in real estate.
Losses and the passive rules
If expenses exceed income, the loss is usually passive and limited, though up to $25,000 may be deductible against other income if you actively participate and your income is under the phase-out. High earners often carry losses forward until they have passive income or sell.
Frequently asked questions
What rate is rental income taxed at?
Your ordinary income rate, applied to net profit after expenses and depreciation.
Do I pay self-employment tax on rent?
Generally no, unless you provide substantial services that make it a business.
Where do I report rental income?
On Schedule E, where you also deduct expenses and depreciation.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.