How does rental income work with income tax?

For example, if I have a home and pay a mortgage of $800 and live in it.

But then buy another home and have a mortgage of $800 a month on it too, but I rent it out for $1200. Will my taxable income be $400 or $1200? Do you get to deduct what you pay for the mortgage and maintenance on the house?
Added (1). How does anyone make any money on rental properties then? :o

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