Taxable income. How do rentals help taxes?

[Robert Omoto]

First off, I realize nobody here is going to give CPA services for free.  I am attempting get an idea of my taxes and found I am positive on my rental properties.  So I am wondering how real estate produces a negative taxable income or if i am missing something.  Here are the estimate nnumbers.

Income: 15900

Interest: 5500

Property tax: 3200

Insurance 1000

Depreciation: 4000

Other expenses: 0

Total: 13700

taxable: 2200

Understandably, other years will have maintenance and other expenses, however not 2700/years worth.  How would cashflow producing real estate ever decrease taxable income?

[Linda Weygant]

Depreciation is a deductible expense, however it's not one that you technically pay out cash for year over year, so you've got a net cash income, but a net tax loss.

So in your example, if you had a higher purchase price on that house, the annual depreciation might be enough to put you in a tax loss situation every year, even though you're cash flowing.

This happens frequently for people who put more than 20% down on the purchase for some houses that don't rent for very much.  Even though they don't have much income, they still cash flow, but then have the depreciation that causes them to realize a tax loss.