Schedule E (Form 1040) is used to report supplemental income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs. It is divided into separate parts to report each type of income. Losses are shown in parentheses. The net total from all parts is carried to Schedule 1 (Form 1040), Part I, line 5.
Part I: Income or Loss From Rental Real Estate and Royalties
Report income and expenses from rental real estate and royalties.
- Rental real estate income and expenses are reported on lines 1a, 1b, and 2 for each property (use a separate column for each property).
- Royalties are reported using code 6 on line 1b; lines 1a and 2 are left blank for royalty-only entries.
- Report only your ownership share of income and expenses if the property is jointly owned.
- Personal property rentals (e.g., equipment or vehicles) are generally not reported on Schedule E unless incidental to real estate; otherwise, use Schedule C if operated as a trade or business.
- Passive activity loss limitations may apply; use Form 8582 when required.
- At-risk limitations may apply; use Form 6198 when applicable.
- Farm rental income based on crops or livestock produced by the tenant is reported on Form 4835, not Schedule E.
Part II: Income or Loss From Partnerships and S Corporations
- Report income or loss from partnerships and S corporations based on Schedule K-1 (Form 1065 or 1120-S).
- Enter each item in the appropriate column using the K-1 instructions.
- Ordinary business income or loss is generally reported on line 28 (as allocated by entity type).
- Other separately stated items (such as depletion or credits) must be reported on separate lines as instructed.
- Passive activity loss rules may limit deductible losses (use Form 8582 where applicable).
- At-risk limitations may apply (use Form 6198 if required).
- Excess business loss limitations under IRC §461(l) are calculated on Form 461 and are reported on Form 1040, not separately on Schedule E.
Part III: Income or Loss From Estates and Trusts
Report income or loss from estates and trusts using Schedule K-1 (Form 1041).
- Enter income, deductions, and credits as reported on the K-1.
- Combine estate and trust items as directed on line 34–37 (as applicable in the 2025 revision).
- Do not use Schedule F or Form 4835 for estate/trust farm income.
Part IV: Income or Loss From Real Estate Mortgage Investment Conduits (REMICs)
Report income or loss from REMIC residual interests using information provided on Schedule Q (Form 1066).
- Include taxable income or loss, credits, and other items as instructed.
- These amounts are generally passive income items subject to passive activity rules.
Part V: Summary
- Combine totals from:
- Rental real estate and royalties (Part I)
- Partnerships and S corporations (Part II)
- Estates and trusts (Part III)
- REMICs (Part IV)
- The total is reported on Schedule E, Part V, line 41.
- Enter the final amount on Schedule 1 (Form 1040), line 5.
Source:
Schedule E (Form 1040)
Disclaimer: Always verify information with the most current Federal or State Department of Revenue Forms and Instructions. For complex tax situations, consult a CPA or tax attorney.