Schedule E: What It Is, How It Works

If you own rental property, you’ll need to file a Schedule E tax form with the IRS to report rental income income or losses. Schedule E is filed along with your Form 1040 individual income tax return.

While having rental income and losses is a common reason for filing a Schedule E — and what we’ll focus on here — you’ll also need to complete this form for other sources of supplemental income, including from royalties, partnerships, S corporations, estates, trusts and residual interests in real estate mortgage investment conduits (REMICs).

What is Schedule E

Schedule E is a tax form that individual taxpayers must file to the IRS along with their Form 1040. Taxpayers need to complete a Schedule E to report supplemental income and losses, including from rental real estate and other sources.

Schedule E is one of several different types of tax forms that taxpayers may need to complete to calculate different types of income, credits and deductions. Schedules provide additional information beyond what’s included on Form 1040.

Who has to file Schedule E

Taxpayers who own rental real estate must file Schedule E to report any income or loss generated from their property. On this tax form, you’ll detail all of the income and expenses for each of your rental properties. But Schedule E is only applicable to individual taxpayers, not people who are in the business of renting property (those taxpayers must instead file Schedule C — more on this below).

While rental real estate is a common reason why taxpayers have to file Schedule E, there are other income situations also captured on this form: royalties, partnerships, S corporations, estates, trusts and residual interests in REMICs.

If you file your taxes electronically with tax preparation software, you’ll be prompted to fill out Schedule E based on your answers to questions about sources of income. However, if you still file taxes by paper, there isn’t a specific prompt related to Schedule E on Form 1040.

The closest mention of Schedule E on the 1040 is line 8, which instructs taxpayers to enter “additional income” from Schedule 1. Schedule 1 is where income from Schedule E is entered, as well as income from other forms and schedules, and then that income flows to line 8 of the 1040.

Schedule E vs. Schedule C

Whether you need to file Schedule E or Schedule C depends on whether you’re renting out property as a business or as a supplementary source of income.

• When to file Schedule E: If you’re renting out part of your home or other property that you own, and it’s a passive source of income, then you should file Schedule E.
• When to file Schedule C: If you rent out property as a business, such as short-term vacation rentals, then you should file Schedule C if you’re actively involved in providing services to tenants.

For more information, check out the IRS instructions regarding rental income and expenses.

How to fill out Schedule E

Schedule E is a two-page form that is split into five parts, including sections applicable to four specific sources of income and a summary section. You only need to complete the parts relevant to your income situation.

If you own rental real estate, you will need a variety of details about your rental property handy, including information about your various expenses.

Part I: Income or loss from rental real estate and royalties

This is the applicable section for taxpayers who have rental real estate, though it also covers income or loss from royalties. To complete this section, you will need to provide several basic details about the property, including:

• The physical address of each applicable property
• The type of property
• The number of rental days and days used for personal use
• Income, and specifically rents received
• Expenses, including insurance, management fees, utilities, taxes, and more

If you are completing this section for income or losses related to royalties, you will need to provide information about royalties received and any applicable expenses.

To complete Part I, you will sum the total income or loss from rental real estate and royalties and, if no other parts of Schedule E are applicable to you, you can enter this total on line 5 of Schedule 1.

Part II: Income or loss from partnerships and S corporations

This section needs to be completed by taxpayers who are a member of a business partnership or a shareholder of an S corporation. You will need several basic details to complete Part II of Schedule E, including:

• The name of the entity
• The employer identification number (EIN) of the partnership or S corporation
• A breakdown of whether the relevant income and loss was passive or non-passive, which refers to whether you materially participated in the business

To complete Part II, you’ll need to refer to Schedule K-1, the form you receive from organizations in which you have a financial interest. If you have a passive loss, you will also need to complete Form 8582, and if you have a Section 179 deduction, you will need to complete Form 4562.

Part III: Income or loss from estates and trusts

You need to complete Part III if you’re a beneficiary of a trust or an estate and have an income or loss to report. To complete Part II, you will need the following information:

• The name of the estate or trust
• The EIN
• A breakdown of whether the relevant income or loss was passive or nonpassive

As with Part II, you will need to refer to the Schedule K-1 that you received, if applicable, and will need to complete Form 8582 if you have a passive loss.

Part IV: Income or loss from real estate mortgage investment conduits (REMICs) — residual holder

You will need to complete Schedule E’s Part IV if you’re an investor in a real estate mortgage investment conduit, or REMIC, which is a structure for pooling mortgages. To complete this information, you will need to refer to the Schedules Q that you received from the REMIC, along with:

• The name of the REMIC
• The EIN
• Information from Schedules Q, including excess inclusion, taxable income or net loss, and income

Part V: Summary

If you completed more than one section on Schedule E, then in Part V you will total the income or loss from these various sources. You then enter that total on line 5 of Schedule 1.

See this IRS page for more details on how to fill out Schedule E.