Schedule E for rental property: what goes where

Schedule E (Form 1040) is where individual owners report rental income and expenses. The net result reaches your Form 1040 through Schedule 1.

Line names below come from the final 2025 form and instructions, the latest final versions when we checked. The IRS's 2026 drafts keep the same lines except line 13, and we note where else they differ.

Who files Schedule E Part I

If you own a rental as an individual, it usually goes on Part I. If you hold it through an entity, your CPA confirms where it's reported. Each property gets its own column, and with more than three you attach more copies and put combined totals on lines 23a through 26 of one. If you provide significant services to the tenant, such as maid service, the activity goes on Schedule C instead.

Questions A and B at the top ask whether you had to file Forms 1099 and whether you did. The threshold for contractor pay and rents was $600 for 2025 and is $2,000 for 2026 payments, though some thresholds, such as gross proceeds paid to an attorney, stay at $600.

The lines a single-family rental uses

Line 1a is the address, and on line 1b a single-family rental is code 1. Line 2 asks for fair rental days and personal use days. If you or your family used the property, expenses are split, and more limits apply once personal use passes the greater of 14 days or 10% of the fair rental days.

On the 2026 draft, line 13 splits into 13a, interest on a loan for a vehicle used in the rental, and 13b, other interest.

Land isn't depreciable, and the building is depreciated over 27.5 years. For faster write-offs on parts of a rental, see bonus depreciation in 2026.

A few more rules from Publication 527 and the instructions. A security deposit you expect to return isn't income. Prepaid insurance covering more than a year is deducted one year's share at a time. Your own labor isn't deductible, and neither is mortgage principal.

Repairs or improvements

Repairs keep the property in an ordinarily efficient operating condition and are deducted. Improvements that better the property, restore it, or adapt it to a new use are capitalized and depreciated. The instructions' examples are fixing a broken lock or painting a room, against adding substantial insulation or replacing an entire HVAC system.

Two annual elections on your return can move small costs to the deductible side. The de minimis safe harbor lets you deduct items up to $2,500 per invoice or item if you expense them under an accounting policy in place at the start of the year, and once elected it covers every cost that qualifies. The small taxpayer safe harbor applies if your average annual gross receipts are $10 million or less, the building's unadjusted basis is $1 million or less, and the year's repairs, maintenance, and improvements on it total no more than the lesser of 2% of that basis or $10,000. Plenty of jobs sit in a gray zone. Your CPA makes the call.

An example with real numbers

This uses a real listing, 2107 S Seale Rd in Phenix City, AL, plus labeled assumptions, for a full year after the first.

Before depreciation, the rental brought in $3,408 more than it cost ($21,600 minus $18,192). Schedule E still shows a $3,501 loss.

Illustrative example. Actual income, expenses, and tax results vary by property and by taxpayer.

Build my plan to see what a portfolio of rentals like this could look like over ten years.

How the loss limits show up

A loss on line 21 doesn't automatically cut your tax. If any of your investment isn't at risk, Form 6198 limits the loss first. Form 8582 then applies the passive loss rules, and line 22 takes what's deductible. You can skip Form 8582 only if every condition in the instructions applies. Among them: rental real estate is your only passive activity, you have no passive losses or credits carried over from earlier years, you actively participated, the net loss is $25,000 or less, and your modified AGI is $100,000 or less. Otherwise the form splits the loss between this year and later ones. Real estate professional status covers who gets around these rules.

Schedule E income can also reach Form 8995 or 8995-A, if the rental qualifies for the qualified business income deduction (permanent starting in 2026), and Form 8960 for the 3.8% net investment income tax. Your CPA decides whether either applies.

Records to keep and common mistakes

Keep records that support everything on Schedule E. Use a separate bank account, file each manager statement and receipt the month it arrives, and keep repair invoices apart from improvement invoices. Our rental property expenses post has a tracker built on these lines.

The usual mistakes:

• Skipping depreciation. Your basis drops by the depreciation you could have taken, whether you claimed it or not, so skipping it doesn't help you at sale.
• Not splitting interest. If a loan was used partly for something else, the interest has to be traced and split.

Lineage does not give tax advice. This article explains general federal rules for educational purposes. Your CPA confirms how they apply to your return.

For the wider picture, see our rental property tax strategy guide. When you're ready for the next rental, build my plan or talk to a consultant.