If you are a fiduciary filing Schedule E with Form 1041, enter the estate's or trust's employer identification number (EIN) in the space for taxmap/instr/i1040se-002.htm#TXMP2238d3cd
Your social security number.
Before you begin, see the instructions for lines 3 and 4 to determine if you should report your rental real estate and royalty income on Schedule C, Schedule C-EZ, or Form 4835 instead of Schedule E.
Use Part I to report:
- Income and expenses from rental real estate (including personal property leased with real estate), and
- Royalty income and expenses.
- For an estate or trust only, farm rental income and expenses based on crops or livestock produced by the tenant. Do not use Form 4835 or Schedule F (Form 1040) for this purpose.
If you own a part interest in a rental real estate property, report only your part of the income and expenses on Schedule E.
Complete lines 1 and 2 for each rental real estate property. Leave these lines blank for each royalty property.
If you have more than three rental real estate or royalty properties, complete and attach as many Schedules E as you need to list them. But fill in the taxmap/instr/i1040se-002.htm#TXMP66ad2917
Totals column on only one Schedule E. The figures in the
Totals column on that Schedule E should be the combined totals for all properties reported on your Schedules E. If you are also using page 2 of Schedule E, use the same Schedule E on which you entered the combined totals for Part I.
Do not use Schedule E to report income and expenses from the rental of personal property, such as equipment or vehicles. Instead, use Schedule C or C-EZ if you are in the business of renting personal property. You are in the business of renting personal property if the primary purpose for renting the property is income or profit and you are involved in the rental activity with continuity and regularity.
If your rental of personal property is not a business, see the instructions for Form 1040, lines 21 and 36, to find out how to report the income and expenses.taxmap/instr/i1040se-002.htm#TXMP71af0b78
Do not use Schedule E to report income and expenses from a rental real estate business that is a qualified joint venture conducted by you and your spouse, if you file a joint return for the tax year.
Generally, if you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are taxed as a partnership. However, if you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make an election to be treated as a qualified joint venture instead of a partnership. For an explanation of
material participation, see the instructions for Schedule C, line G, that begin on page C-3.
To make the election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Each of you must file a separate Schedule C or C-EZ. On each line of your separate Schedule C or C-EZ, you must enter your share of the applicable income, deduction, or loss. See the instructions for Schedule C or C-EZ and Publication 527 for more details.
As long as you remain qualified, your election cannot be revoked without IRS consent.Note.(p3)
Rental income reported on Schedule E is not taxable for self-employment tax purposes. Electing qualified joint venture status and using the Schedule C or C-EZ does not alter the application of the self-employment tax or the passive loss limitation rules.taxmap/instr/i1040se-002.htm#TXMP66f1161b
Except as otherwise provided in the Internal Revenue Code, gross income includes all income from whatever source derived. Gross income, however, does not include extraterritorial income that is qualifying foreign trade income under certain circumstances. Use Form 8873 to figure the extraterritorial income exclusion. Report it on Schedule E as explained in the Instructions for Form 8873.taxmap/instr/i1040se-002.htm#TXMP18025436
If you were a debtor in a chapter 11 bankruptcy case, see page 20 of the instructions for Form 1040.taxmap/instr/i1040se-002.htm#TXMP55fa212a
For rental real estate property only, show all of the following.
- The kind of property you rented (for example, townhouse, commercial building, mobile home, and self-storage unit).
- The street address, city or town, state, and ZIP code. If the property is located in a foreign country, enter the city, province or state, country, and postal code.
- Your percentage of ownership in the property, if less than 100%.
If you rented out a dwelling unit that you also used for personal purposes during the year, you may not be able to deduct all the expenses for the rental part.
Dwelling unit (unit) means a house, apartment, condominium, or similar property.
A day of personal use is any day, or part of a day, that the unit was used by:
- You for personal purposes,
- Any other person for personal purposes, if that person owns part of the unit (unless rented to that person under a
shared equity financing agreement),
- Anyone in your family (or in the family of someone else who owns part of the unit), unless the unit is rented at a fair rental price to that person as his or her main home,
- Anyone who pays less than a fair rental price for the unit, or
- Anyone under an agreement that lets you use some other unit.
Do not count as personal use:
- Any day you spent working substantially full time repairing and maintaining the unit, even if family members used it for recreational purposes on that day, or
- Any days you used the unit as your main home before or after renting it or offering it for rent, if you rented or tried to rent it for at least 12 consecutive months (or for a period of less than 12 consecutive months at the end of which you sold or exchanged it).
if you or your family used the unit for personal purposes in 2008 more than the greater of:
- 14 days, or
- 10% of the total days it was rented to others at a fair rental price.
If you checked
No you can deduct all your expenses for the rental part, subject to the At-Risk Rules and the Passive Activity Loss Rules explained beginning on page E-1.
If you checked
Yes and rented the unit out for fewer than 15 days in 2008, do not report the rental income and do not deduct any rental expenses. If you itemize deductions on Schedule A, you can deduct allowable interest, taxes, and casualty losses. If you do not itemize, you can increase your standard deduction by certain state or local real estate taxes and a net disaster loss attributable to a federally declared disaster.
If you checked
and rented the unit out for at least 15 days in 2008, you may not be able to deduct all your rental expenses. You can deduct all of the following expenses for the rental part on Schedule E.
- Mortgage interest.
- Real estate taxes.
- Casualty losses.
- Other rental expenses not related to your use of the unit as a home, such as advertising expenses and rental agents' fees.
If any income is left after deducting these expenses, you can deduct other expenses, including depreciation, up to the amount of remaining income. You can carry over to 2009 the amounts you cannot deduct.
See Pub. 527 for details.taxmap/instr/i1040se-002.htm#TXMP675051ce
If you received rental income from real estate (including personal property leased with real estate) and you were not in the real estate business, report the income on line 3. Use a separate column (A, B, or C) for each rental property. Include income received for renting a room or other space. If you received services or property instead of money as rent, report the fair market value of what you received as rental income.
Be sure to enter the total of all your rents in the
Totals column even if you have only one property.
If you provided significant services to the renter, such as maid service, report the rental activity on Schedule C or C-EZ, not on Schedule E. Significant services do not include the furnishing of heat and light, cleaning of public areas, trash collection, or similar services.
If you were in the real estate sales business, include on line 3 only the rent received from real estate (including personal property leased with real estate) you held for investment or speculation. Do not use Schedule E to report income and expenses from rentals of real estate held for sale to customers in the ordinary course of your real estate sales business. Instead, use Schedule C or C-EZ for these rentals.
For more details on rental income use TeleTax topic 414 (see the Instructions for Form 1040, page 84), or see Pub. 527.taxmap/instr/i1040se-002.htm#TXMP3ecc593a
Report farm rental income and expenses on Form 4835 if:
- You are an individual,
- You received rental income based on crops or livestock produced by the tenant, and
- You did not materially participate in the management or operation of the farm.
Report on line 4 royalties from oil, gas, or mineral properties (not including operating interests); copyrights; and patents. Use a separate column (A, B, or C) for each royalty property. Be sure to enter the total of all your royalties in the
Totals column even if you have only one source of royalties.
If you received $10 or more in royalties during 2008, the payer should send you a Form 1099-MISC or similar statement by February 2, 2009, showing the amount you received.
If you are in business as a self-employed writer, inventor, artist, etc., report your royalty income and expenses on Schedule C or C-EZ.
You may be able to treat amounts received as
royalties for the transfer of a patent or amounts received on the disposal of coal and iron ore as the sale of a capital asset. For details, see Pub. 544.
Enter on line 4 the gross amount of royalty income, even if state or local taxes were withheld from oil or gas payments you received. Include taxes withheld by the producer on line 16.taxmap/instr/i1040se-002.htm#TXMP554f4adb
Enter your rental and royalty expenses for each property in the appropriate column. You can deduct all ordinary and necessary expenses, such as taxes, interest, repairs, insurance, management fees, agents' commissions, and depreciation.
Do not deduct the value of your own labor or amounts paid for capital investments or capital improvements.
Enter your total expenses for mortgage interest (line 12), total expenses before depreciation expense or depletion (line 19), and depreciation expenses or depletion (line 20) in the taxmap/instr/i1040se-002.htm#TXMP40868bf9
Totals column even if you have only one property.
If you rent out only part of your home or other property, deduct the part of your expenses that applies to the rented part.taxmap/instr/i1040se-002.htm#TXMP675aeb07
You may be able to claim a tax credit for eligible expenditures paid or incurred in 2008 to provide access to your business for individuals with disabilities. See Form 8826 for details.
You can also elect to deduct up to $15,000 of qualified costs paid or incurred in 2008 to remove architectural or transportation barriers to individuals with disabilities and the elderly.
You cannot take both the credit and the deduction for the same expenditures. taxmap/instr/i1040se-002.htm#TXMP1bb7f235
You can deduct ordinary and necessary auto and travel expenses related to your rental activities, including 50% of meal expenses incurred while traveling away from home. You generally can either deduct your actual expenses or take the standard mileage rate. You must use actual expenses if you used more than four vehicles simultaneously in your rental activities (as in fleet operations). You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle.
You can use the standard mileage rate for 2008 only if you:
- Owned the vehicle and used the standard mileage rate for the first year you placed the vehicle in service, or
- Leased the vehicle and are using the standard mileage rate for the entire lease period (except the period, if any, before 1998).
If you take the standard mileage rate, multiply the number of miles driven in connection with your rental activities by:
- 50.5 cents for miles driven from January 1, 2008, through June 30, 2008; and
- 58.5 cents for miles driven from July 1, 2008, through December 31, 2008.
Include this amount and your parking fees and tolls on line 6.
You cannot deduct rental or lease payments, depreciation, or your actual auto expenses if you use the standard mileage rate.
If you deduct actual auto expenses:
- Include on line 6 the rental activity portion of the cost of gasoline, oil, repairs, insurance, tires, license plates, etc., and
- Show auto rental or lease payments on line 18 and depreciation on line 20.
If you claim any auto expenses (actual or the standard mileage rate), you must complete Part V of Form 4562 and attach Form 4562 to your tax return.
See Pub. 527 and Pub. 463 for details.taxmap/instr/i1040se-002.htm#TXMP21cef467
Include on line 10 fees for tax advice and the preparation of tax forms related to your rental real estate or royalty properties.
Do not deduct legal fees paid or incurred to defend or protect title to property, to recover property, or to develop or improve property. Instead, you must capitalize these fees and add them to the property's basis.taxmap/instr/i1040se-002.htm#TXMP4c3d521f
In general, to determine the interest expense allocable to your rental activities, you must have records to show how the proceeds of each debt were used. Specific tracing rules apply for allocating debt proceeds and repayment. See Pub. 535 for details.
If you have a mortgage on your rental property, enter on line 12 the amount of interest you paid for 2008 to banks or other financial institutions. Be sure to enter the total of all your mortgage interest in the
Totals column even if you have only one property.
Do not deduct prepaid interest when you paid it. You can deduct it only in the year to which it is properly allocable. Points, including loan origination fees, charged only for the use of money must be deducted over the life of the loan.
If you paid $600 or more in interest on a mortgage during 2008, the recipient should send you a Form 1098 or similar statement by February 2, 2009, showing the total interest received from you.
If you paid more mortgage interest than is shown on your Form 1098 or similar statement, see Pub. 535 to find out if you can deduct part or all of the additional interest. If you can, enter the entire deductible amount on line 12. Attach a statement to your return explaining the difference. On the dotted line next to line 12, enter Note.(p5)
If the recipient was not a financial institution or you did not receive a Form 1098 from the recipient, report your deductible mortgage interest on line 13.
If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on the mortgage, and the other person received Form 1098, report your share of the deductible interest on line 13. Attach a statement to your return showing the name and address of the person who received Form 1098. On the dotted line next to line 13, enter
You can deduct the cost of repairs made to keep your property in good working condition. Repairs generally do not add significant value to the property or extend its life. Examples of repairs are fixing a broken lock or painting a room. Improvements that increase the value of the property or extend its life, such as replacing a roof or renovating a kitchen, must be capitalized and depreciated (that is, they cannot be deducted in full in the year they are paid or incurred). See the instructions for line 20.taxmap/instr/i1040se-002.htm#TXMP1b21cddd
You can deduct the cost of ordinary and necessary telephone calls related to your rental activities or royalty income (for example, calls to the renter). However, the base rate (including taxes and other charges) for local telephone service for the first telephone line into your residence is a personal expense and is not deductible.taxmap/instr/i1040se-002.htm#TXMP3af517b4
You may be able to deduct, on line 18, part or all of the cost of modifying existing commercial buildings to make them energy efficient. For details, see section 179D, Notice 2006-52, and Notice 2008-40. You can find Notice 2006-52 on page 1175 of Internal Revenue Bulletin 2006-26 at www.irs.gov/irb/2006-26_IRB/ar11.html
. You can find Notice 2008-40 on page 725 of Internal Revenue Bulletin 2008-14 at www.irs.gov/irb/2008-14_IRB/ar12.html
Depreciation is the annual deduction you must take to recover the cost or other basis of business or investment property having a useful life substantially beyond the tax year. Land is not depreciable.
Depreciation starts when you first use the property in your business or for the production of income. It ends when you deduct all your depreciable cost or other basis or no longer use the property in your business or for the production of income.
See the Instructions for Form 4562 to figure the amount of depreciation to enter on line 20. Be sure to enter the total of all your depreciation in the
Totals column even if you have only one property.
You must complete and attach Form 4562 only if you are claiming:
- Depreciation on property first placed in service during 2008,
- Depreciation on listed property (defined in the Instructions for Form 4562), including a vehicle, regardless of the date it was placed in service, or
- A section 179 expense deduction or amortization of costs that began in 2008.
See Pub. 527 for more information on depreciation of residential rental property. See Pub. 946 for a more comprehensive guide to depreciation.
If you have an economic interest in mineral property, you may be able to take a deduction for depletion. Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). See Pub. 535 for details.taxmap/instr/i1040se-002.htm#TXMP4dc2b677
If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it.
If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes.taxmap/instr/i1040se-002.htm#TXMP3a38b931
If you have amounts for which you are not at risk, use Form 6198 to determine the amount of your deductible loss. Enter that amount in the appropriate column of Schedule E, line 22. In the space to the left of line 22, enter taxmap/instr/i1040se-002.htm#TXMP3e138bc8
Form 6198. Attach Form 6198 to your return. For details on the at-risk rules, see page E-1.
Do not complete line 23 if the amount on line 22 is from royalty properties.
If you have a rental real estate loss from a passive activity (defined on page E-2), the amount of loss you can deduct may be limited by the passive activity loss rules. You may need to complete Form 8582 to figure the amount of loss, if any, to enter on line 23. See the Instructions for Form 8582 to determine if your loss is limited.
If your rental real estate loss is not from a passive activity or you meet the exception for certain rental real estate activities (explained on page E-2), you do not have to complete Form 8582. Enter the loss from line 22 on line 23.