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You can download Schedule E, Form 4835 and Schedule C to aid in your financial planning. |
Tax Guide |
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If you rented out residential or commercial real estate during the year, you will normally report your income and expenses from this activity on Part I of Schedule E, Supplemental Income and Loss.
Schedule E has space for up to three different real estate or royalty properties. Line 1 asks you to identify the type of property (from the list provided) and the street address.
For each property, you must also provide the number of Fair Rental Days and Personal Use Days. See the discussion on vacation homes that explains how to make the count.
In addition, you should indicate if this is a qualified joint venture. If you and your spouse each materially participate as the only members of a jointly owned and operated rental real estate business and you file a joint return for the tax year, you can elect to be treated as a qualified joint venture instead of a partnership. This doesn’t affect your tax liability but it provides you the advantage of not having to file a partnership return.
Income and expenses for each property are reported separately in columns A, B, and C, and the totals from all properties combined are entered in the "totals" column. If you have more than three properties, use as many copies of Schedule E as you need. Just be sure to fill out the "totals" column on only one of the copies, which will become the "master."
If you own less than 100 percent of the property, you should report your portion of the income and expenses on Schedule E regardless of who actually received the check for the income or paid the expenses out of pocket.
Schedule E is not used to report farm rental income if the rent is paid in the form of a percentage of the crops or livestock produced on the farm. In that case, you must use Form 4835, Farm Rental Income and Expenses, instead. But if the farm rent is paid in terms of a flat fee, use Schedule E.
Also, if you provide a large number of services to tenants in a residential property, you may have to treat your activity as being more akin to running a hotel (reported on Schedule C) than investing in real estate. The IRS says that providing maid service to tenants can transform your activity into a business, not a Schedule E rental. However, providing occasional cleaning or concierge services would probably not be sufficient to change the nature of your activity.
For more details on how to handle rental real estate on your tax return, check out the following:
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