Schedule E Tax Forms: Reporting Your Rental Income
Author:
Scott SteinbergJan 4, 2024
•4-minute read
Are you a real estate investor? Do you receive rental income? If you answered “yes” to either question, you likely need to fill out the IRS Schedule E: Supplemental Income and Loss tax form. Whether you own several rental properties or rent a room on Airbnb, you must report your rental income to the IRS.
If you’re wondering how to fill out Schedule E (Form 1040) or where to find instructions, you’ve come to the right place. We’ll take a closer look at the Schedule E tax form and its role in determining your taxable income.
What Is Schedule E?
Schedule E is the official IRS tax form to report supplemental income, including real estate investments. You use Schedule E (Form 1040) to report income or losses from:
- Rental real estate
- Royalties
- Partnerships
- S corporations
- Estates
- Trusts
- Residual interests in real estate mortgage investment conduits (REMICs)
Individual taxpayers who generate supplemental income from renting real estate – no matter the property type – must attach a Schedule E tax form to their IRS Form 1040. From full-time real estate investors to house hackers, you must use Schedule E to report supplemental income from rental property and real estate investments on your tax return.
The Schedule E tax form is primarily used by individual taxpayers. Partnerships and S corporations file Form 8825 instead, but we’ll clarify that distinction later.
Schedule E Vs. Self-Employment Tax
Despite all the work it takes to be a landlord and manage a property, the IRS classifies rental income as passive income. Because of this tax classification, real estate investors don’t pay self-employment tax.
Passive business activities are activities owners don’t actively engage in on a regular, substantial and continuing basis. The IRS treats business activities that require active participation differently from passive business activities. The IRS limits losses from passive activities to the number of gains, while losses from active business activities aren’t limited.
Regardless of whether or not (and to what extent) you actively participate in the operation of your rental investments, the IRS categorizes rental real estate activities as passive for tax purposes. Because the income is passive, investors can only claim losses up to their gains. Active participants can claim all their losses.
Schedule E Vs. Schedule C
Schedule E is used to report rental income earned over a given tax year. However, you may need to report business income with Schedule C if you provide certain services to your tenants.<