Articles · Basics · Individual Income Tax and Form 1040
Schedule E: Reporting Rental Income
Most individual landlords report rental real estate on Schedule E. The schedule also reports income from partnerships, S corporations, estates, and trusts.
Income and expenses
Rental income includes rent, advance rent, and tenant-paid expenses. Deductible expenses include mortgage interest, property tax, insurance, management fees, and repairs.
Repairs are deductible now, while improvements are capitalized and depreciated. Fixing a broken window is a repair. Replacing the whole roof is usually an improvement.
Depreciation
Residential rental buildings are depreciated over 27.5 years. Land is not depreciable, so the purchase price must be split between land and building. Depreciation is required even if it is not claimed, because it reduces basis when the property is sold.
Losses and personal use
Rental losses are generally passive and may be limited, although active participants can often use a limited allowance against other income. If the owner also uses the property personally, expenses must be divided and Section 280A may limit deductions.
Key takeaways
- Separate repairs from improvements.
- Depreciate the building, not the land.
- Passive loss rules can limit rental losses.
For general education only, not tax advice. Tax law changes often, so confirm current rules and amounts with primary sources.