Do the pros really pay 0 in taxes?

[David Matthews]

Hi all - Dave Matthews here. I've got two properties now, townhome and single family, both rented. This will be my first year where I will be reporting ALL the rental income (some 60k or so). My question to you all is how in the world do folks deduct deduct deduct so that their tax burden on rental income is zero or close to it? I am worried that I will owe big in 2026... 

[Chris Seveney]

Quote from @David Matthews:

Hi all - Dave Matthews here. I've got two properties now, townhome and single family, both rented. This will be my first year where I will be reporting ALL the rental income (some 60k or so). My question to you all is how in the world do folks deduct deduct deduct so that their tax burden on rental income is zero or close to it? I am worried that I will owe big in 2026... 

 Just remember its not that they are not paying taxes - its they are deferring them.

As an example (not a CPA), lets say you have $10,000 in income and you depreciate your property by $10,000 - your net gain is zero BUT your cost basis (lets say you paid $250,000 for the property) is now $240,000. So if you sell it for $300,000 - the property now has a $60k gain (not $50k). Hope that makes some sense.

You can 1031 to defer it but a 1031 is typically done by institutional investors and its rare for individuals to do it.