Form 1040 Schedule E: Rental Income
Schedule E reports rental real estate income and expenses on the individual tax return. Unlike Schedule C, rental income on Schedule E is not subject to self-employment tax, making it the preferred form for most rental property owners.
What It Reports
- Gross rental income from each property
- Operating expenses (interest, taxes, insurance, repairs)
- Depreciation (residential buildings over 27.5 years)
- Net income or loss per property
- Partnership and S corporation income (Parts II-III)
Mortgage Qualification Impact
- Net rental income + depreciation add-back = cash flow
- Positive cash flow adds to qualifying income
- Negative cash flow reduces qualifying income
- Projected rental income used for properties not yet owned
Deductible Expenses
Mortgage interest, property taxes, insurance, repairs, depreciation, management fees, advertising, legal fees, utilities, HOA fees, and travel to manage the property. Improvements must be capitalized and depreciated.
Related Terms
- Equity — Rental income builds property equity
- Estate for Years — The rental lease interest
- Closing — Rental income verified at closing
Barnes Walker Real Estate
Barnes Walker's attorneys advise Florida rental property owners on tax reporting, entity structuring, and lease compliance. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC