Taxable Income

Definition: Income remaining after the exclusions and deductions allowed for the relevant tax calculation. For rental property, taxable results can differ substantially from cash flow.

Example

An owner deducts allowable rental expenses and depreciation, while mortgage principal payments are not treated as a rental expense deduction.

Keep the distinction clear

Net operating income is not automatically taxable income. Interest, depreciation, capital improvements, loss limitations, and the taxpayer's circumstances can change the tax result.

Related terms

Net Operating Income (NOI) · Before-Tax Cash Flow · Depreciation

Keep studying

Tax Depreciation: Land, Building Basis, and Recovery Periods

References: IRS Publication 527: residential rental property

Pronunciation (US): TAK-suh-bul IN-kum (capitals show stress)

Pronunciation reference: Merriam-Webster