Thanks, Cheddar!! That's awesome. Do you have this in spreadsheet form?
I agree with Brooklyn. Even with all the info in front of you, this is hard to analyze.
One other point is that this doesn't factor in depreciation for the rental business or the business generating earned income.
So.... if a rental business is generating net of $20K, the 50% rule says their annual gross is $40K. The 1% rule says their monthly gross of 40K/12=3333 should be resulting from property worth $333,333. If 80% of that value is structure and 20% land, (we'll ignore closing costs and rehab) and say the cost basis for depreciation is $266,666. Of that, 1/27.5 or $9696 is depreciated annually. Net 20K, pay tax on 10K, defer tax the other 10K. Defer not just for 27.5 years, but until you sell.
So if you assume those variables:
a) gross rent is 1% of purchase price
b) net income is half of gross income
c) 80% of purchase price is in structure (and for simplicity ignore closing costs and rehab, which will increase amount depreciated)
d) it's residential and depreciated over 27.5 years
It follows that depreciation will allow you to defer nearly half (almost exactly half) of your net. Which means in Cheddar's example, only $10K would make it to the "business income" line.
It is true that the alternative side gig that generates $20K net may also have some depreciation to claim. But it's hard to imagine a business that with $40K gross and $20K net generating $10K per year in depreciation, even with schedules of less than 27.5 years for equipment.