EITC and Rental Income

[cd86]

So 2016 is my first tax year that I have a rental property; in prior years I have qualified for the Earned Income Tax Credit (EITC) easily with increasing my HSA and retirement contributions. I am not certain about this year, due to the rental income.

Do any of you know if net rental income is calculated after subtracting depreciation? It appears as this is so (Line 18 on Schedule E), but I wanted to make sure before making my year-end contributions to my 401k. If depreciation is not included, I will have over $3400 in rental income and therefore not qualify for the EITC.

*FYI - the house was purchased in 2009 for $72,000 and has a current fair market value of about $65,000. I rent the house for $650/mo.

Thanks in advance!

[MDM]

Do any of you know if net rental income is calculated after subtracting depreciation? It appears as this is so (Line 18 on Schedule E), but I wanted to make sure before making my year-end contributions to my 401k.

Yes, that is where it happens.

See Worksheet 1 on page 6 of 2015 Publication 596 - p596.pdf, in which it asks for the line 26 amount from Schedule E (i.e., the amount after depreciation is subtracted).

To confirm, you could take last year's tax software and do a "dummy" return using all last year's numbers except adding your rental situation.