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The basics
Enable rent on the property card and enter the rental share, rent, land share, and depreciation history. The model builds rental income from that property’s own rent and costs.
Depreciation reduces modeled taxable profit without taking cash out of the household that year. Mortgage principal takes cash but is not a rental-income deduction.
Illustrative numbers
Cash and taxable income differ
Rent received$30,000
Deductible cash costs$20,000
Depreciation$8,000
Taxable rental result before other rules$2,000
The property has $10,000 before mortgage principal and income tax, although the initial taxable result is $2,000.
Calculation transparency
How it works in MoneyWhatIf
- 01
Mortgage interest, property tax, insurance, and upkeep contribute to rental costs. A partially rented property allocates the relevant costs and building basis by its rental share.
- 02
Land is excluded from depreciation. The model uses straight-line residential or commercial recovery periods and subtracts years already depreciated for a property owned before the plan.
- 03
Passive-loss rules can limit the current deduction and carry unused losses forward. The model also includes a rental QBI deduction subject to its income rules.
- 04
Depreciation lowers basis. A later sale can release suspended losses and expose depreciation-related gain to the modeled recapture calculation.
Keep in mind
Model limits
The model does not determine real-estate-professional status, material participation, cost segregation, or every QBI eligibility condition.
Enter property rent once. A separate income card for the same rent would count the receipts again.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
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The words behind it
Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.