Schedule E reports income and expenses from rental properties, real estate partnerships, and certain other sources to the IRS

Schedule E is the form you file with your tax return when you own rental property, a vacation home you rent out part of the year, or a share in a partnership or S corporation that owns real estate. It goes to the IRS along with your main tax return (Form 1040) and tells them how much money came in from rent, how much you spent maintaining the property, and what your actual profit or loss was for the year.

Most landlords and property owners file Schedule E. If you rent out a single-family home, an apartment, a condo, or even a room in your house, you will need this form. The IRS uses it to verify that you are reporting all rental income and to check whether your deductions are reasonable for the type of property you own.

You do not need Schedule E if you own property but do not rent it out, or if you only rent out a property for a few days a year as a personal vacation home. The rules change depending on how many days you use the property yourself versus how many days tenants use it, so the threshold matters.

Key Takeaways

  • Schedule E reports rental income, expenses, and profit or loss from properties you own or co-own.
  • You file it with your main tax return (Form 1040) every year you have rental income, even if your property lost money.
  • The form asks for details about each property separately, including the address, the dates you owned it, and whether it is residential or commercial.
  • Common deductions on Schedule E include mortgage interest, property taxes, insurance, repairs, utilities, and property management fees.
  • If you own the property with a partner or through an LLC, the rules for who files Schedule E depend on how the business is structured.

What goes on Schedule E and what does not

Schedule E has two main sections. Part I is for rental real estate income and expenses. You list each property you own separately, give its address, describe what kind of property it is (single-family home, apartment building, vacation rental, commercial space), and report the dates you owned it during the tax year.

Then you report all the money that came in: rent from tenants, parking fees, laundry machine income, or any other money the property generated. Below that, you list every expense you paid to keep the property running and earning income. These include mortgage interest (but not the principal you paid down), property taxes, insurance premiums, repairs and maintenance, utilities, advertising for tenants, property management fees, condo or HOA fees, and depreciation.

Part II of Schedule E covers income from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits (REMICs). If you own a piece of a rental property through a partnership or an S corp, your share of the income and loss flows to you on a Schedule K-1 form, which you then report on Schedule E Part II. You do not calculate the income yourself — your business partner or the company sends you the K-1, and you copy the numbers onto Schedule E.

Deductions you can claim on Schedule E

The IRS allows you to deduct any ordinary and necessary expense you paid to earn rental income. This means the expense has to be normal for that type of property and directly connected to running it as a rental.

Mortgage interest is deductible, but the principal portion of your payment is not — your mortgage statement should break these out for you. Property taxes are fully deductible. Insurance for the building and liability coverage is deductible. Repairs and maintenance — fixing a leaky roof, patching drywall, replacing a broken window, painting — are deductible. Utilities you pay (water, sewer, trash, sometimes electric or gas) are deductible. Property management fees you pay to a company or person who handles tenant issues and maintenance are deductible.

Depreciation is a deduction that does not involve actual cash leaving your pocket. The IRS assumes buildings wear out over time and lets you deduct a portion of the building's value each year. You cannot depreciate the land itself, only the structure. Depreciation is calculated on Form 8949 or Schedule C, depending on your situation, and then reported on Schedule E. This deduction can be valuable, but it also affects your taxes when you eventually sell the property, so it is worth understanding before you claim it.

You cannot deduct capital improvements — major upgrades that add value to the property or extend its life, like a new roof, new HVAC system, or room addition. These go on your tax basis instead and are recovered through depreciation over many years. The line between a repair (deductible) and an improvement (not deductible) is not always clear, and the IRS has specific rules about it.

How ownership structure affects who files Schedule E

If you own the rental property by yourself as an individual, you file Schedule E in your own name. The income and loss flow through to your personal tax return.

If you own the property with a spouse and file a joint return, you both report it on one Schedule E together. If you own it with someone else who is not your spouse, the situation depends on how you structured the ownership. If you own it as a partnership or as members of an LLC taxed as a partnership, each owner receives a Schedule K-1 from the partnership, and each owner files their own Schedule E Part II reporting their share. The partnership itself does not pay income tax — the income passes through to the owners.

If you own the property through an S corporation, the same pass-through rule applies: you get a K-1, you report it on Schedule E Part II. If you own it through a C corporation, the corporation files its own tax return and pays corporate tax; you do not file Schedule E for that property unless the corporation also pays you a dividend, which would be reported differently.

When you have a loss instead of a profit

Some years your rental expenses will exceed your rental income, and you will have a loss. You still file Schedule E and report the loss. The loss can offset other income on your tax return, which may lower your overall tax bill.

However, the IRS has rules about how much loss you can claim if your income is above a certain level. These are called passive activity loss limitations. If you are a real estate professional (meaning you spend more than half your working time on real estate and more than 750 hours per year), you may be able to claim the full loss. If you are not, there are income thresholds above which your ability to deduct losses is limited. A tax professional can tell you whether these rules explore to you.

Even if you cannot deduct the loss in the current year, it does not disappear. It carries forward to future years and can offset future rental income or be used when you sell the property.

Depreciation and what happens when you sell

Depreciation is a valuable deduction while you own the property, but it has a cost when you sell. When you sell a rental property, the IRS requires you to "recapture" the depreciation you claimed — meaning you pay tax on it at a rate of 25 percent, even if your overall profit on the sale is lower.

For example, if you claimed $50,000 in depreciation over ten years and then sold the property for a $30,000 profit, you would owe tax on the $50,000 of depreciation at the 25 percent recapture rate, plus tax on the $30,000 profit at your regular capital gains rate. This is why it is important to understand depreciation before you claim it — the deduction now means a larger tax bill later.

You do not have to claim depreciation if you do not want to, but the IRS will assume you did and tax you on it anyway when you sell. So there is no advantage to skipping the deduction.

How to file Schedule E with your return

Schedule E is filed as part of your complete tax return. You complete it, attach it to Form 1040, and send everything to the IRS or file electronically through tax software or a tax professional.

If you use tax software (TurboTax, H&R Block, TaxAct, or similar), the software will walk you through the questions and fill in Schedule E for you. You will need to gather documents: your lease or rental agreement, records of all rent received, receipts or statements for every expense you paid, your mortgage statement showing interest and principal, property tax bills, insurance bills, and any other documentation of money in or out.

If you work with a tax professional or accountant, bring them these same documents and they will prepare Schedule E for you. Many landlords use a professional for this because the rules around repairs versus improvements, depreciation, and passive loss limitations can be complex, and a mistake can trigger an audit.

Frequently Asked Questions

Do I have to file Schedule E if I only rented out my house for a few months?

It depends on how many days you rented it and how many days you used it yourself. If you rented it out for more than 14 days and used it yourself for fewer than 14 days, you generally must file Schedule E and report the income. If you used it yourself for more than 14 days, different rules explore and you may not need Schedule E at all. Check the IRS instructions for Form 8949 or speak with a tax professional about your specific situation.

Can I deduct the cost of buying furniture or appliances for the rental?

Furniture and appliances are depreciable assets, not when ready deductions. You cannot deduct their full cost in the year you buy them. Instead, you depreciate them over their useful life (usually 5 to 7 years for appliances and furniture). This is reported on Form 4562 and then flows to Schedule E. If the item costs less than $2,500, you may be able to deduct it when ready under the de minimis safe harbor rule, but the rules are specific and a tax professional should review your situation.

What if I own the rental property with my business partner?

If you own it as a partnership, the partnership files a Form 1065 with the IRS, and you receive a Schedule K-1 showing your share of income and loss. You then report your K-1 amounts on Schedule E Part II. Each partner files their own Schedule E. If you own it as an LLC taxed as a partnership, the process is the same.

Do I report the principal I paid on my mortgage on Schedule E?

No. Only the interest portion of your mortgage payment is deductible and reported on Schedule E. The principal is not an expense — it is a reduction in what you owe. Your mortgage statement breaks out interest and principal separately, so you can see which amount to claim.

What if I have a loss on my rental property — can I use it to reduce my other income?

You can report the loss on Schedule E, but whether you can use it to offset other income depends on your total income and whether you meet the real estate professional test. If your modified adjusted gross income is below $150,000 and you are not subject to passive loss limitations, you can deduct up to $25,000 of rental losses against other income. Above that income level, the deduction phases out. A tax professional can tell you what applies to your situation.