Instructions for Schedule E (Form 1040)
taxmap/instr/i1040se-002.htm#TXMP158619adtaxmap/instr/i1040se-002.htm#TXMP59516d7bIf 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
Your social security number.
taxmap/instr/i1040se-002.htm#TXMP220dc98e | Before you begin, see the instructions for lines 3 and 4
on page E-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. |
taxmap/instr/i1040se-002.htm#TXMP241bfeacUse Part I to report the following.
- Income and expenses from rental real estate (including personal
property leased with real estate).
- 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
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.
taxmap/instr/i1040se-002.htm#TXMP66ad2917Do 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#TXMP3fe028a8Do 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.
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 taxed as a qualified joint venture
instead of a partnership. This election in most cases will not increase the
total tax owed on the joint return, but it does give each of you credit for
social security earnings on which retirement benefits are based and for Medicare
coverage. For an explanation of
material participation,
see the instructions for Schedule C, line G.
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. Each of you also must file a separate Schedule SE to pay SE tax, as
applicable (but see the
Note
below regarding rental income reported on Schedule E). See the
instructions for Schedules C or C-EZ and SE and Pub. 527 for more details.
As long as you remain qualified, your election cannot be revoked
without IRS consent.
For more information on qualified joint ventures, go to IRS.gov.
Enter "QJV election" in the search box and select
Benefits of Qualified Joint Ventures for Family Businesses.
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#TXMP3484271fExcept as otherwise provided in the Internal Reve nue 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#TXMP17c07ce1If you were a debtor in a chapter 11 bankruptcy case, see
Chapter 11 Bankruptcy Cases
under
Income in the Instructions for Form 1040.
taxmap/instr/i1040se-002.htm#TXMP72215bc2For rental real estate property only, show all of the following.
- The kind of property you rented (for example, townhouse, commercial
building, mobile home, or 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).
Check
Yes
if you or your family used the unit for personal purposes in 2010 more than the
greater of:
- 14 days, or
- 10% of the total days it was rented to others at a fair rental
price.
Otherwise, check
No.
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-2.
If you checked
Yes
and rented the unit out for fewer than 15 days in 2010, 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 checked
Yes
and rented the unit out for at least 15 days in 2010, you may not be able to
deduct all your rental expenses. You can deduct all 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 2011 the amounts you cannot deduct.
| Regardless of whether you answered
No or
Yes
to Question 2, expenses related to days of personal use do not qualify as rental
expenses. You must allocate your expenses based on the number of days of
personal use to total use of the property. For example, you used your property
for personal use for 7 days and rented it for 63 days. In most cases, 10%
(7÷70) of your expenses are not rental expenses and cannot be deducted on
Schedule E. |
See Pub. 527 for details.
taxmap/instr/i1040se-002.htm#TXMP38af6dedIf you received rental income from real estate (including personal
property leased with real estate), 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 a real estate dealer, include on line 3 only the
rent received from real estate (including personal property leased with this
real estate) you held for the primary purpose of renting to produce income. Do
not use Schedule E to report income and expenses from rentals of real estate you
held for sale to customers in the ordinary course of your business as a real
estate dealer. Instead use Schedule C or C-EZ for those rentals.
For more details on rental income, use TeleTax topic 414 (see
What is TeleTax?
in the Instructions for Form 1040), or see Pub. 527.
taxmap/instr/i1040se-002.htm#TXMP3ecc593aReport 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 2010, the payer
should send you a Form 1099-MISC or similar statement by January 31, 2011,
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#TXMP4bc865c3Enter 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
Totals
column even if you have only one property.
taxmap/instr/i1040se-002.htm#TXMP793adba5If 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#TXMP4e7ccd00You may be able to claim a tax credit for eligible expenditures
paid or incurred in 2010 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 2010 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#TXMP0cd4f76eYou 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. In most cases you 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 2010 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 cents. 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#TXMP21cef467Include 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#TXMP7e93678eIn most cases, 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 2010 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 2010,
the recipient should send you a Form 1098 or similar statement by January 31,
2011, 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
See attached.
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
See attached.
taxmap/instr/i1040se-002.htm#TXMP095edb95You can deduct the cost of repairs made to keep your property
in good working condition. Repairs in most cases 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 on this page.
taxmap/instr/i1040se-002.htm#TXMP1b21cdddYou 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#TXMP5bf61697Enter on line 18 any ordinary and necessary expenses not listed
on lines 5 through 17 and line 20.
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 2010,
- 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 2010.
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#TXMP0befaa80If 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#TXMP35b0807fIf 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
Form 6198.
Attach Form 6198 to your return. For details on the at-risk rules, see page E-2.
taxmap/instr/i1040se-002.htm#TXMP75039409Do 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.
If you have an unallowed rental real estate loss from a prior
year that after completing Form 8582 you can deduct this year, include that loss
on line 23.
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