Newbie question, please help

[Nathan Christensen]

I have seen many examples of 'cash flow analysis' Rental Income minus expenses, mortgage payments, and expected vacancy rate (let me know if I'm leaving something out). However I would believe that the rental income is taxable as income therefore you would be working with a diminished income to pay off all those expenses. Is it legal to pay taxes after paying expenses. Must you you use a corporation to shelter your passive income from taxes to do this? Please tell me how this works as far as taxes are concerned. Thank you ahead of time!