How to Calculate Rental Income
- 1). Calculate the annual operating expense of the property by adding the property tax, insurance and
repair costs. Refer to the 1098 tax document from your lender for the amount of property taxes for the year and to your insurance statement for the premium. - 2). Calculate the annual depreciation expense of the building by dividing the original cost of the building, excluding the land, by 27.5 years.
- 3). Determine your annual mortgage interest expense by referring to the 1098 statement from your lender.
- 4). Add the operating, depreciation and annual mortgage interest expenses.
- 5). Calculate the rental income by subtracting the expenses from the amount of rent you received for the year.
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