5.8%
United States
Cash-on-cash return calculator — rental cash flow and IRR after tax
Principal isn’t deductible, but it still leaves your account every month. We count it.
Cash-on-cash return divides the cash a rental puts in your pocket by the cash you put into the deal — down payment plus closing costs. This calculator builds a real amortization schedule, so principal payments come out of your cash flow, applies federal and state tax each year, and adds the sale at the end — including depreciation recapture — to give an after-tax IRR on your equity.
Year 1 costs you $2,864 after tax
After-tax IRR over 10 years including the sale: 5.8%. Cash you put in: $101,750 (transfer tax $1,500 included).
$2,674/month
4.38%
-6.6%
$42,817
$200,488
| Year | Rent collected | Interest | Principal | Tax | Cash after tax | Equity |
|---|---|---|---|---|---|---|
| 1 2026 | $26,220 | $18,189 | $3,144 | -$3,846 | -$2,864 | $110,019 |
| 2 2027 | $27,007 | $17,978 | $3,354 | -$3,796 | -$2,475 | $126,957 |
| 3 2028 | $27,817 | $17,754 | $3,579 | -$3,613 | -$2,206 | $144,596 |
| 4 2029 | $28,651 | $17,514 | $3,818 | -$3,423 | -$1,931 | $162,966 |
| 5 2030 | $29,511 | $17,258 | $4,074 | -$3,224 | -$1,650 | $182,101 |
| 6 2031 | $30,396 | $16,985 | $4,347 | -$3,017 | -$1,363 | $202,037 |
| 7 2032 | $31,308 | $16,694 | $4,638 | -$2,802 | -$1,071 | $222,809 |
| 8 2033 | $32,247 | $16,384 | $4,949 | -$2,576 | -$772 | $244,456 |
| 9 2034 | $33,215 | $16,052 | $5,280 | -$2,341 | -$468 | $267,020 |
| 10 2035 | $34,211 | $15,698 | $5,634 | -$2,096 | -$158 | $290,542 |
4 assumptions in these figures
- Assumption: No rules are published yet for 2028 to 2035; the 2027 rules and thresholds are held constant.
- Assumption: 2027 inflation adjustments not yet published; 2026 amounts held (no indexation).
- Assumption: 2027 inflation adjustments not yet published; 2026 amounts held (no indexation).
- Assumption: 2027 inflation adjustments not yet published; 2026 amounts held (no indexation).
Worked example
A $375,000 purchase with $93,750 down, $6,500 of closing costs and $1,500 of transfer tax: $101,750 of cash in. The 30-year mortgage at 6.5% costs $21,332 in year one, of which $3,144 is principal.
After operating costs and debt service the property produces -$6,710 before tax (cash-on-cash -6.6%). Depreciation and interest create a tax loss that saves $3,846, so after-tax cash flow is -$2,864 (-2.8%).
Selling after 10 years at 3.5% annual appreciation, the $110,954 of depreciation taken is recaptured: $110,954 of the gain is unrecaptured §1250 gain taxed at up to 25%, and the rest is long-term capital gain. Total tax on the sale is $58,315. After-tax IRR over the whole period: 5.8%.
Year-one after-tax cash flow breaks even at $2,674 a month of rent or a mortgage rate of 4.38%.
Why principal matters
Many calculators subtract only interest, which makes an amortizing loan look cheaper than it is in cash terms. Principal is not deductible, but it leaves your bank account every month. We show it separately — it is also the part of the payment that builds equity, which comes back to you when you sell and is counted in the IRR.
Tax when you sell
When you sell, your gain is the amount realized (price minus selling costs) minus your adjusted basis (purchase price plus capitalized closing costs, minus depreciation allowed). The part of the gain equal to depreciation taken is unrecaptured section 1250 gain, taxed at your ordinary rates but no more than 25%; the remainder is long-term capital gain taxed at 0%, 15% or 20% depending on your income (IRS Topic 409, Rev. Proc. 2025-32 thresholds). Net investment income tax may add 3.8%.
What this calculator does not include
- 1031 exchanges and installment sales.
- Refinancing or rate changes during the hold.
- Tax years after 2026 hold 2026 brackets unindexed (listed in the assumptions panel).
- Capital improvements during ownership.
Questions landlords ask
What is a good cash-on-cash return?
It is only meaningful next to your alternatives. Compare the after-tax figure with what the same cash would earn after tax elsewhere — and remember appreciation and principal paydown are not in cash-on-cash but are in IRR.
Do closing costs count in cash-on-cash?
Yes. They are cash you invest. Most closing costs are also added to your basis and depreciated with the building.
What is depreciation recapture?
On sale, the gain attributable to depreciation you took is taxed as unrecaptured section 1250 gain at up to 25%, instead of the lower capital gains rates.
Tax rules: US registry v1.0.0, last reviewed 2026-09-30. Figures in the text use the default inputs above. Sources and method.