First, rental expense and depreciation can always deduct against rental income. So after ducting rental expense and depreciation from rental income, you still have profit, you need to pay taxes on that profit.
Rental expense includes: management fee, tenant search expense, interests, insurance, tax etc. Rental depreciation is house structure value excluding land divided by 27.5 years. You must include depreciation in your expense calculation.
If your renatl house has a net loss (rental expense and depreciation exceeds rental income), you usually cannot deduct rental loss against your other salaried income. The exception is for income less than $150,000 some or all rental loss can be deduct from other salary income.
If your income is mor than $150,000, only $3000 of your net loss can be deducted from your salary income, and the rest the loss is carried forward to next year and the next year until you sold your rental unit.
Above rules applies to passive income, that is, your rental is a hobby not a business. There are separate rules for rental as business income, if your time spent on rental business is more than any other business activity (such as going to a full time work).
