Schedule E (Supplemental Income and Loss)
The federal tax form for reporting rental real estate income, royalties, and pass-through income from partnerships, S corporations, estates, and trusts.
Detailed Explanation
Schedule E reports rental property income and expenses (depreciation, mortgage interest, repairs, property tax, insurance, professional fees) for each property. Rental losses are subject to passive activity loss rules; up to $25,000 of losses can be deducted by active participants with AGI below $100,000, fully phased out at $150,000. Real estate professionals (per IRC Section 469(c)(7)) can deduct rental losses against ordinary income with no phaseout.
Key Points
- Reports rental real estate, royalties, and pass-through K-1 income (Parts I through III).
- Rental income is generally passive, so losses are limited by the passive activity loss rules.
- Active participants with AGI under $100,000 may deduct up to $25,000 of rental losses; fully phased out at $150,000.
- Real estate professionals (IRC §469(c)(7)) can deduct rental losses against ordinary income with no cap.
- Suspended passive losses carry forward and are released when the property is sold.
Practical Example
An investor owns a rental that grosses $30,000 in rent but, after mortgage interest, property tax, and $12,000 of depreciation, shows a $10,000 tax loss. With AGI of $90,000 and active participation, the full $10,000 loss is deductible against other income. At $160,000 AGI the $25,000 allowance is gone, so the loss is suspended and carried forward unless the investor qualifies as a real estate professional.
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Learn about Individual Tax PreparationRelated Terms
Form 1040 (US Individual Income Tax Return)
The individual income tax return that reconciles a year of income, deductions, and credits against tax already paid, producing a refund or balance due.
Schedule K-1
A tax document issued by partnerships, S corporations, estates, and trusts to report each owner's share of income, deductions, credits, and other tax items.
Depreciation
The deduction of the cost of a tangible business asset over its useful life, reflecting wear, tear, or obsolescence.
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