$26,400 is not considered taxable income. The $26,400 of rent received minus $27,000 of expenses is not "additional 'income' for which you will need to pay taxes on". It's a deductible tax loss. The loss gets even bigger when you add in insurance and depreciation. Even if you're ineligible for the loss, because of high income; you still get to reduce the net taxable income to zero and the loss accumulates for a future deduction.
