How to Report Rental Income on Schedule E
Rental income from real estate, including personal property leased with real estate, must be reported on Schedule E (Form 1040). This form is used to report income and expenses from rental real estate, royalties, and certain other passive activities.
Key Reporting Rules for Rental Income
- Line 3 Reporting: Report all rental income received on Line 3 of Schedule E. Use a separate column (A, B, or C) for each rental property. Include income from renting a room or other space.
- Non-Monetary Rent: If you receive services or property instead of money as rent, report the fair market value of those items as rental income on Line 3.
- Partial Ownership: If you own a part interest in a rental property, report only your share of the income and expenses on Schedule E.
- Multiple Properties: If you have more than three rental real estate or royalty properties, complete and attach additional Schedules E. However, only one Schedule E should include lines 23a through 26, which must reflect the combined totals for all properties.
- Personal Property Rental: Do not use Schedule E to report income from renting personal property (e.g., equipment or vehicles) if you are in the business of renting such items. Instead, use Schedule C. You are considered to be in the business if the rental is done with continuity and regularity for profit.
- Real Estate Dealer Exception: If you are a real estate dealer (holding property for sale to customers), do not use Schedule E for rentals. Instead, report those rentals on Schedule C.
- Self-Rental: If you rent property to a trade or business in which you materially participate, enter code “7” on line 1b. For other types of property not listed, enter code “8” and attach a description.
Additional Considerations
- Passive Activity Losses: If you have passive activity losses, you may need to file Form 8582 to apply loss limitations.
- Net Investment Income Tax: You may need to file Form 8960 to pay Net Investment Income Tax on certain rental and passive income.
- Special Rules: For rentals involving substantially nondepreciable property or property related to activities in which you materially participate, refer to Publication 925 for special rules.
Source:
Schedule E (Form 1040) - Supplemental Income and Loss
Disclaimer: Always verify details with the official IRS Forms and Instructions or your state Department of Revenue. OLT (Online Taxes) provides guidance based on retrieved context but does not guarantee tax compliance.