IRS Schedule E (Supplemental Income and Loss) reports income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs. Taxpayer includes Schedule SE with their annual Form 1040 (US Individual Income Tax Return)

Relevant Parts of Schedule E on Form 1040

Part I – Income or Loss From Rental Real Estate and Royalties:

Part I reports income and expenses related to rental real estate or royalty income. For example, if a taxpayer purchases a single-family home and rents it to a tenant, the taxpayer reports the rental income, expenses, depreciation, and days rented.

Part I can also be used to report income from royalties. For example, if a taxpayer writes and sells a book on Amazon Publishing, each sale will generate royalty income. The taxpayer can report those royalties on Schedule E Part I.

Part II – Income or Loss From Partnerships and S Corporations:

Part II reports passthrough income and loss from a partnership or S corporation. The taxpayer would receive a Schedule K-1 (Form 1120S) or Schedule K-1 (Form 1065) that reports ordinary income (loss) on Line 1.

The taxpayer reports the Line 1 amount as either passive or nonpassive income, depending upon whether the taxpayer materially participates in the business operations. The taxpayer must also be mindful of the passive activity loss (PAL) rules and PAL limitations on Form 8582 (Passive Activity Loss Limitations).

Part III – Income or Loss From Estates and Trusts:

Part III reports passthrough income and loss from an estate or trust. The taxpayer would receive a Schedule K-1 (Form 1041) that reports ordinary income (loss) on Line 1.

Part IV – Income or Loss From Real Estate Mortgage Investment Conduits (REMICs):

Interest income from a REMIC is reported to taxpayers on Form 1099-INT and Form 1099-OID. A taxpayer reports these details in Part IV of Schedule E.

Part V – Summary:

Part V is a summary of the income & loss items reported in Parts I, II, III, and IV.

Video Tutorials on Schedule E

Please visit our video tutorials on Schedule E and related topics:

Additional Information

Taxpayers looking for more information can view the Schedule E instructions.