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Estimate annual rental net income and the federal tax change after the supported rental loss limits.
Schedule E net
$10,000Federal tax change
$2,200Additional ordinary income taxThe rental is treated as passive using your entered facts.
Example: illustrative other taxable income of $80,000, MAGI of $95,000 and $100,000 at risk.
Rates as of
Annual rent minus deductible expenses and depreciation produces the starting Schedule E net. Enter your ownership share in US dollars for 2026. Expenses exclude depreciation, loan principal and capital purchases, and improvements, repairs and personal costs need the correct classification.
The engine then applies the at-risk, passive activity and excess-business-loss limits, in that order. Each suspended amount follows different future rules, so do not enter it in more than one carryover field.
Finally, the calculator compares progressive ordinary federal tax with and without the modeled rental, holding other return facts, including your final Form 8582 MAGI, constant; it does not recalculate every income-linked deduction. Other taxable income is not salary: it is after deductions and includes the entered other activities after their loss limits.
The example uses $36,000 of annual rent, $12,000 of expenses and $14,000 of depreciation. That leaves $10,000 of Schedule E net income before loss limitations.
For a single filer with $80,000 of other taxable ordinary income, the $10,000 profit remains in the 22% federal bracket. The additional regular federal tax estimate is $10,000 × 22% = $2,200.
These limits come from the Internal Revenue Code: section 465 (at-risk rules), section 469 (passive activity losses, including the $25,000 allowance) and section 461(l) (excess business losses). IRS Publication 925 and the Form 6198, 8582 and 461 instructions explain how to apply them.
Amount at risk is the available Form 6198 amount before the loss deduction, not a property valuation or mortgage balance. Carried at-risk losses join the current result before this limit, but prior passive carryovers are not put through the at-risk test again.
For ordinary passive rentals, active participation and at least 10% ownership can permit up to $25,000 against other income. The allowance falls by half the MAGI above $100,000. Separate filers living apart all year use $12,500 and $50,000; living together at any time removes this allowance. Eligible carried losses require active participation in the loss year as well as the current year.
The engine shares the special allowance among eligible losses, then allocates remaining disallowed losses proportionately. Business portions support the later Form 461 calculation without treating every investment rental as a business.
Real estate professional treatment requires one individual to exceed 750 qualifying hours and spend more than half their trade or business working time in qualifying real property work. Joint filers cannot combine spouses’ hours for those tests. The same rental must also meet a material-participation test; spouses’ qualifying work can be combined for that separate test.
Management work is excluded from the facts-and-circumstances hours when another paid manager exists or another person manages for longer. A professional’s current loss may be nonpassive, but old passive losses are not automatically released, and current profit can first absorb them.
This is a continuing ordinary residential rental owned directly by an individual, not a partnership or S corporation return. Supply basis-checked depreciation. Sales, at-risk recapture, personal-use homes, short stays outside ordinary rental rules, substantial guest services, publicly traded partnerships, recharacterized income and passive credits are outside this form.
The 2026 excess-business-loss threshold is $256,000, or $512,000 on a joint return, applied to the business portion allowed after passive limits. Other net business income or loss must exclude wages and the passive pools already entered. Any resulting NOL needs a later return calculation, and the business-loss figure is separate from at-risk and passive carryovers.
The estimate combines the current 2025 IRS procedural instructions with the published 2026 tax brackets and thresholds. It is not a complete return or a refund calculation, and carried losses are not a current refund.
State and local tax, NIIT, QBI, AMT, credits, capital-gain stacking, changes to deductions and unused personal deductions are excluded. Keep source records for expenses, hours, ownership, financing and carryovers, and have a tax professional check unusual arrangements or any eligibility fact you cannot establish.
No. Other taxable income sets the ordinary tax brackets after deductions. Form 8582 modified adjusted gross income determines the rental special allowance and requires separate adjustments. Supply both from your records; the comparison holds the entered MAGI fixed.
Only after the applicable limits. Active participation with at least 10% ownership can permit a special allowance, subject to MAGI and spouse rules. Qualifying professional and material-participation facts may instead make current rental activity nonpassive. At-risk and business-loss limits can still apply.
This rental’s carried passive losses can offset its current profit. Unused amounts remain subject to passive rules, even if you now qualify as a real estate professional. Other passive losses can also affect the comparison. At-risk carryovers are entered separately and tested first.
Form 8582 allocates allowed losses before Form 461 restricts excess trade or business losses. Some investment rentals are not section 162 businesses. Separating the business portions prevents a nonbusiness loss from incorrectly using the business-loss threshold.
No. It is a reduction in modeled regular federal ordinary income tax. The estimate cannot reduce that tax below zero, and a refund also depends on payments and the rest of your return. NOL carryforwards have separate rules.
No. Enter deductible expenses without depreciation or mortgage principal. Enter depreciation once from the applicable asset schedule, after basis and personal-use checks. This calculator applies income and loss limits; it does not reconstruct an asset’s depreciation history.
