What is
Schedule E?

Schedule E (Supplemental Income and Loss) is the form you attach to your Form 1040 to report income and losses from rental properties, partnerships, S-corporations, estates, and trusts. If you collect rent from a tenant or receive a Schedule K-1 from a business you don't actively run, this is where it goes.

Unlike Schedule C — which is for active self-employment — Schedule E covers passive and supplemental income streams. The math is the same principle: income minus expenses equals net profit or loss. But the rules around what you can deduct, especially rental losses, are more restrictive due to passive activity loss limits.

Breaking down Schedule E

Schedule E has five parts, but most individual taxpayers only use Part I (rentals) and Part II (partnerships and S-corps).

• Part I — Rental real estate (Lines 1–26) — Report up to three properties per Schedule E (attach additional Schedule Es for more). Lines 3–19 list every deductible expense: advertising, auto/travel, cleaning, commissions, insurance, legal fees, management fees, mortgage interest, repairs, supplies, taxes, utilities, and depreciation.
• Line 20 — Total expenses — Sum of all rental expenses for each property.
• Line 21 — Net income or loss — Rent received minus total expenses. A loss here is common for landlords who claim depreciation — but passive loss rules may limit how much you can actually deduct.
• Line 26 — Total rental income/loss — Combined net from all properties. Flows to Schedule 1, Line 5, then to your 1040.
• Part II — Partnerships and S-corps (Lines 27–32) — Enter income or loss from each K-1 you received. You report your share of the entity's income — you don't list the entity's individual expenses here; those are handled on the business's own return.
• Part III — Estates and trusts — Income reported on Schedule K-1 (Form 1041) from estates or trusts you're a beneficiary of.
• Part IV — REMIC income — Rare for most taxpayers. Applies to residual interest in real estate mortgage investment conduits.
• Part V — Summary — Totals from all parts combined. Net supplemental income or loss flows to your 1040.

Every dollar of legitimate rental expense reduces your taxable rental income. These are the categories on Schedule E Part I that apply to most landlords:

• Mortgage interest — Interest on the rental property loan (reported on Form 1098 if over $600). Principal payments are not deductible.
• Property taxes — Real estate taxes paid on the rental property.
• Depreciation — The building (not the land) is depreciated over 27.5 years for residential rental property. This is often the largest deduction and the one most new landlords miss entirely.
• Repairs vs. improvements — Fixing a broken faucet is a deductible repair. Replacing the entire roof is a capital improvement that must be depreciated over time, not deducted immediately.
• Property management fees — If you use a management company, their fees are fully deductible.
• Insurance — Landlord insurance, liability coverage, and flood insurance on the rental property.
• Travel and mileage — Driving to check on the property, meet tenants, or pick up supplies. Keep a mileage log.

• 01Am I claiming depreciation on my rental property, and is my cost basis calculated correctly?
• 02Do I qualify for the $25,000 active participation allowance, or are my losses limited by passive activity rules?
• 03Do I have suspended passive losses from prior years that I can release this year?
• 04Should this expense be classified as a repair (deduct now) or an improvement (depreciate over time)?
• 05Do I qualify as a real estate professional, which would remove passive loss limits entirely?
• 06When I sell the rental, how much depreciation recapture tax will I owe?