Updated October 24, 2026. Quick answer: Line 6 of the Pennsylvania PA-40 is where you report net income or loss from rents, royalties, patents or copyrights. The booklet generally points you to PA Schedule E and tells you to fill in the oval for a total net loss. Only the positive amount carries into the line 9 total. This page walks through what the booklet and the form print for line 6.
What this line does
The booklet’s instruction heading for this line is “NET INCOME OR LOSS FROM RENTS, ROYALTIES, PATENTS, OR COPYRIGHTS”. On the form, line 6 sits on the first side, the page marked Side 1, and reads “Net Income or Loss from Rents, Royalties, Patents, or Copyrights.”
The booklet defines the two kinds of income it means: “Rental income includes the amounts you receive for the use of, or the right to use, your real or personal property.” “Royalty income includes the amounts you receive for the extraction of coal, oil, gas, or other minerals in place” and goes on to name other property. For the whole sequence of lines see Pennsylvania Form PA-40 line by line.
Who it applies to
Landlords and royalty recipients who are not in business use line 6: “If not in the business of rents, report your rental activity on a PA Schedule E on Line 6.” Those who are in business use line 4 instead: “If in the business of renting your property, you report your net profit (loss) on a PA Schedule C.” The booklet’s page 17 sets out the conditions that make a rental a business, which is the subject of Pennsylvania Form PA-40 line 4.
Retirees with rental income can compare the federal treatment on rental income in retirement and on Schedule E (Form 1040), and the line by line federal walk-through on Schedule E lines 3 and 4.
What the instructions say
| Line | What the form says |
|---|---|
| Form, line 6 | “Net Income or Loss from Rents, Royalties, Patents, or Copyrights.” |
| Rental income | “Rental income includes the amounts you receive for the use of, or the right to use, your real or personal property.” |
| Royalty income | “Royalty income includes the amounts you receive for the extraction of coal, oil, gas, or other minerals in place” |
| Business or not | “If in the business of renting your property, you report your net profit (loss) on a PA Schedule C.” “If not in the business of rents, report your rental activity on a PA Schedule E on Line 6.” |
| Rental business, first test | “Report rental business when:” “You offer the use of your property with the intention of realizing a profit; and” |
| Rental business, second test | “The leasing of your property is characterized by regularity and continuity of activities; and” |
| Receipts left out of gross rents and royalties | “Receipts from the sale, exchange, or other disposition of rental, royalty, and similar property” |
| Which schedule | “Report the total income (loss) from all PA Schedules E and all PA Schedules RK-1 or NRK-1. Generally, you must use PA Schedule E.” “You may use federal Schedule E, if using only Part I, and with the following adjustments:” |
| Adjustment, passive loss | “Report passive rental/royalty loss in full, rather than carry it over to future years.” |
| Adjustment, capital gains | “Add any capital gains and distributions that you report on other federal schedules.” |
| Adjustment, sales tax on depreciation | “Do not take any depreciation expense on sales tax that you elected to currently expense for PA personal income tax purposes.” |
| Adjustment, optional sales tax expense | “Optional: Deduct sales tax on acquired property as an expense currently rather than add it to the basis of the property as required for federal purposes.” |
| Adjustment, shares from entities | “You must separately show your share of any rental or royalty gain (loss) that you realize as a partner, a shareholder of a PA S corporation, or other entity.” |
| A total net loss | “If you realize a total net loss, fill in the oval next to Line 6 on your PA-40.” |
| Married filers | “If married and you both have income (losses) in this class, see REPORTING NET INCOME, GAINS AND LOSSES ON LINES 4, 5, AND 6 ONLY on Page 15.” |
| Rental without a profit motive | “Generally, PA law follows IRC Section 280A if you rent or lease your property, but do not intend to realize a profit.” “Therefore, your rental expenses are limited to your rental income, and you may not use a loss.” |
| Rental and Royalty Allowable Expenses | “You deduct those expenses that you paid or incurred during the taxable year that are ordinary and necessary for:” |
| Expenses not allowed | “You may not deduct expenses for your own labor, capital investment, or capital improvements.” “You may not deduct personal expenses or that part of any expense that is personal.” |
| Capital improvements | “You recover costs associated with capital improvements through depreciation deductions.” |
| Lease with an Option to Buy | “A lease with an option to buy may be a purchase contract under accepted accounting principles and practices.” “the payments you received under the contract are payments of the purchase price and are not includable as rental income.” |
| Selling Mineral Interests, Patents, or Copyrights | “If you gave up all rights to mineral interests, patents, or copyrights, the amounts you received are considered payments for the sale or exchange of property.” |
The figures the form prints
One of the conditions for treating a rental as a business, on page 17 of the booklet, is printed as a single bullet: “The average period of customer use is less than 30 days”. It is one of several alternatives joined by the word or, so the bullet is not a test on its own.
Where the result goes next
Line 9 adds up your income classes: “Total PA Taxable Income. Add only the positive income amounts from Lines 1c, 2, 3, 4, 5, 6, 7, and 8.” The form adds “DO NOT ADD any losses reported on Lines 4, 5, or 6.” Line 9 is covered on Pennsylvania Form PA-40 line 9.
The state overview for retirees is on Pennsylvania retirement taxes.
Edition and line numbers
This page reads 2025 PA Personal Income Tax Return Instructions (PA-40 IN), Pennsylvania Department of Revenue, and 2025 Form PA-40, Pennsylvania Income Tax Return, Pennsylvania Department of Revenue, for tax year 2025, the current files the Pennsylvania Department of Revenue served on 2026-10-24. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Using the federal Schedule E without the Pennsylvania adjustments. The booklet says “You may use federal Schedule E, if using only Part I, and with the following adjustments:”
- Deducting your own labor or improvements as an expense. The booklet states “You may not deduct expenses for your own labor, capital investment, or capital improvements.”
- Treating a sale of the rights as rent. The booklet says “If you gave up all rights to mineral interests, patents, or copyrights, the amounts you received are considered payments for the sale or exchange of property.”
Related: rental income in retirement, Schedule E (Form 1040), Schedule E lines 3 and 4, and Pennsylvania retirement taxes.
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Answer againSources
- 2025 PA Personal Income Tax Return Instructions (PA-40 IN), Pennsylvania Department of Revenue: www.pa.gov
- 2025 Form PA-40, Pennsylvania Income Tax Return, Pennsylvania Department of Revenue: www.pa.gov
- Related official page (not quoted): Pennsylvania Department of Revenue, personal income tax forms and publications: www.pa.gov
Read from the state revenue documents linked above on October 24, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.