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If the borrower is able to document (per the table below) that the rental property was not in service the previous tax year, or was in service for only a portion of the previous tax year, the lender may determine qualifying rental income by using Schedule E income and expenses, and annualizing the income (or loss) calculation; or
Rental income is treated like most regular income and is taxed at your marginal tax rate. When you sell the properties, that will be treated as a capital gain and taxed at whatever the capital gains tax rate is at that point in time.