Schedule E (Form 1040): Reporting supplemental income and loss

If you ever earn supplemental income from a rental property, royalty, or pass-through business entity, you will want to know about Schedule E. The schedule, titled “Supplemental Income and Loss,” reports income and expenses for several types of business entities — and even some real estate rental activity.

What is Schedule E?

First order of business is figuring out the question, “what is a schedule E?” Essentially, it’s a tax schedule that is attached to IRS Form 1040 to report supplemental income, or income you earn above and beyond your regular compensation. Supplemental income sources include:

• Estates
• Partnerships
• Rental real estate income
• Royalties
• S corporations
• Trusts

Who uses Schedule E?

Businesses in multiple industries will use Schedule E. From home-sharing owners (think vacation rentals and other rental real estate activity) to IT consultants, depending on the type of business you run, you could be responsible for filing Schedule E with your tax return this tax year.

The following business entities should file IRS Schedule E:

• S corporations
• Partnerships

The following entities won’t have to worry about filing this tax schedule:

• Corporations (Reports income on IRS Form 1120, the corporate return)
• Sole proprietors (Reports income on Schedule C)
• Single-owner LLCs (Reports income Schedule C)

Non-business entities could fill out this form, too. You’ll have Schedule E income to report if you receive income from a:

• Trust
• Rental real estate activity
• Estate

Schedule E instructions

Looking for Schedule E instructions? You’ve come to the right place. We’ve got those listed below, but also know you’ve come to Block Advisors—we live for this stuff. Let our tax pros take care of filing Schedule E, so you can focus on your business.

When completing IRS Schedule E, only fill out the sections that relate to the type of income or loss you have. So, if you have income from a partnership, for example, then you should only complete Part II, the section that applies to partnerships.

The top of the Schedule includes a form field for personal information such as the name or names listed on your tax return and Social Security number.

Part 1: Income or loss from rental real estate and royalties

Answer a series of questions, then include the physical address of each rental property, type of property, rents and royalties received, expense on each property. Each line will eventually equate to the total rental real estate and royalty income or loss.

Part 2: Income or loss from partnerships and S corporations

Include the name, Partnership type, EIN, then check if a basis computation is required or any amount is not at risk. Then, you’ll fill out passive income and loss, as well as nonpassive income and loss. Adding these columns together, you’ll arrive at the total partnership and S corporation income or loss.

Part 3: Income or loss from estates and trusts

List your name, EIN, passive income and loss, and nonpassive income and loss. Compute your totals to arrive at total estate and trust income or loss.

Part 4: Income or loss from real estate mortgage investment conduits (REMICs) – Residual holder

List your name, EIN, Excess inclusions from Schedule Q, and income from Schedule Q.

Part 5: Summary

List net farm income or loss from Form 4835 (if applicable), total income or loss, reconciliation of farming and fishing income (if applicable), and reconciliation for real estate professionals (if applicable).

Attach Schedule E to your individual Form 1040 and submit it by the tax filing deadline, which typically falls on April 15.

Get help with Schedule E tax form

If you’re confused on how to fill out the Schedule E tax form, or simply don’t have the time, we can help. Our tax pros are experienced in serving a range of industries from real estate and development, to salons and consulting. Connect with a Block Advisors tax professional in person or virtually for year-round tax prep help. Trust your taxes to our team!

This article is for informational purposes only. The content may not constitute the most up-to-date information and should not be construed as legal advice.

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