Schedule E 2025: Rental, Royalty, K-1 and Trust Income

Updated October 7, 2026. Quick answer: Schedule E (Form 1040) reports income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and REMIC residual interests. Part I covers rentals and royalties property by property, Part II covers Schedule K-1 income from partnerships and S corporations, and Part III covers estates and trusts. Loss limits for basis, at-risk and passive activity rules apply before a loss is deducted, and Part V combines the totals.

Related reading on this site: IRS Publication 527.

More IRS forms and schedules, read line by line: Form 4835 instructions.

S corporation return (Form 1120-S) for 2025, read line by line: Form 1120-S Schedule K lines 1 to 4 and Form 1120-S Schedule K lines 5 to 10.

Partnership return (Form 1065) for 2025, read line by line: Form 1065 lines 11 to 14 and Form 1065 Schedule K lines 1 to 4.

Sales of business property (Form 4797), passive activity losses (Form 8582) and depreciation (Form 4562) for 2025, read line by line: Form 4797 lines 13 to 18, Form 4797 lines 19 to 24 and Form 4562 lines 6 to 13.

Schedule D and Schedule E (Form 1040) for 2025, read line by line: Schedule D line 19, Schedule E Part II and Schedule E lines 38 to 43.

Schedule 2 (Form 1040) for 2025, read line by line: Schedule 2 line 12.

Schedule 1 (Form 1040) for 2025, read line by line: Schedule 1 lines 3 to 6, Schedule 1 lines 8l to 8p and Schedule 1 lines 9 and 10.

Form 1040 for 2025, lines 12 to 38 read line by line: Form 1040 line 13.

More IRS forms and schedules, read line by line: Form 8275 instructions.

The recipient copy of Form 1099-G or 1099-K, read box by box: 1099-G boxes 4 to 9.

The recipient copy of Form 1099-NEC or 1099-MISC, read box by box: 1099-NEC boxes 1b to 1d, 1099-NEC box 2 and 1099-NEC box 3.

More IRS forms and schedules, read line by line: Form 1065 instructions.

The shareholder’s Schedule K-1 (Form 1120-S), boxes 13 to 19: Schedule K-1 boxes 18 and 19, Schedule K-1 box 17 codes A, B and U and Schedule K-1 box 17 code V.

The shareholder’s Schedule K-1 (Form 1120-S), read box by box: Schedule K-1 box 3, Schedule K-1 box 9 and Schedule K-1 box 11.

The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 12, Schedule K-1 box 20 O and P and Schedule K-1 box 20 N AE AF.

The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 2, Schedule K-1 box 4 and Schedule K-1 box 7.

More IRS forms and schedules, read line by line: Form 1040 instructions and Form 6198 instructions.

More IRS forms and schedules, read line by line: Form 1099-MISC instructions.

What Schedule E covers and how Part I is set up

“Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs.”

Part I is organized by property. “Complete lines 1a, 1b, and 2 for each rental real estate property.” “For royalty property, enter code “6” on line 1b and leave lines 1a and 2 blank for that property.” The form has room for three properties per page, and “If you own a part interest in a rental real estate property, report only your part of the income and expenses on Schedule E.”

Not every rental belongs here. “Do not use Schedule E to report income and expenses from the rental of personal property, such as equipment or vehicles.” Services change the schedule too: “if you provided significant services to the renter, such as maid service, report the rental activity on Schedule C, not on Schedule E.”

Line 3 takes rents received. “If you received services or property instead of money as rent, report the fair market value of the services or property as rental income on line 3.” Line 4 is for royalties. Ownership structure is covered on the LLC for rental property page, and the retirement-income view is on the rental income in retirement page.

Fair rental days, personal use days and the 14 day rule

Line 2 asks for two day counts per property. “For each property listed on line 1a, report the number of days in the year each property was rented at fair rental value and the number of days of personal use.”

Whether the unit counts as a home depends on the personal use days: “You used the unit as a home if your personal use of the unit was more than the greater of:” 14 days, or 10% of the total days it was rented to others at a fair rental price. If it was not used as a home, “you can deduct all your expenses for the rental part, subject to the at-risk rules and the passive activity loss rules, explained earlier.”

If it was used as a home, the rental length matters. “If you did use the unit as a home and rented the unit out for fewer than 15 days in 2025, do not report the rental income and do not deduct any rental expenses.” At 15 or more days, “you may not be able to deduct all your rental expenses.”

Personal use days also reduce the deductible share. The instructions give the method: “For example, you used your property for personal use for 7 days and rented it for 63 days. In most cases, 10% (7 ÷ 70) of your expenses are not rental expenses and cannot be deducted on Schedule E.” Applying that to expenses of $9,000 (a figure chosen here for illustration), the computed 10% is $900 that is not a rental expense, which leaves $8,100 as rental expenses.

Expenses, lines 5 to 20

“You can deduct all ordinary and necessary expenses, such as taxes, interest, repairs, insurance, management fees, agents’ commissions, and depreciation.” “Do not deduct the value of your own labor or amounts paid for capital investments or capital improvements.”

Repairs and improvements are split on line 14: “Repairs and maintenance costs are those costs that keep the property in an ordinarily efficient operating condition.” In contrast, “improvements are amounts paid to better or restore your property or adapt it to a new or different use.” Improvements are generally capitalized and depreciated.

Mortgage interest goes on line 12 when the lender is a bank or similar institution. “If you paid $600 or more in interest on a mortgage during 2025, the recipient should send you a Form 1098 or similar statement by January 31, 2026, showing the total interest received from you.” Other interest goes on line 13. Vehicle use on line 6 can use the mileage rate: “multiply the number of miles driven in connection with your rental activities by 70 cents a mile.”

Depreciation is line 18. “Land is not depreciable.” “See the Instructions for Form 4562 to figure the amount of depreciation to enter on line 18.” The purchase price is split between land and building by relative value, which the instructions describe on line 18. Lines 23a to 23e then total the figures across all properties.

Losses: at-risk, passive activity and Form 8582

A loss on Part I is tested before it is deducted. “If you have amounts for which you are not at risk, use Form 6198 to determine the amount of your deductible loss.” Passive activity rules come next: “You can deduct losses from passive activities in most cases only to the extent of income from passive activities.” Line 22 is where the allowed amount lands: “You may need to complete Form 8582 to figure the amount of loss, if any, to enter on line 22.” The line by line rules for Form 8582 are on the Form 8582 page.

A rental loss can escape Form 8582 when every condition of a listed exception is met. Two of the numbers: “Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately).” “Your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately).” The other conditions include active participation, no prior-year unallowed passive losses, and rental real estate being the only passive activity.

Real estate professionals are treated differently. One of two required tests is “You performed more than 750 hours of services during the year in real property trades or businesses in which you materially participated.” “If you were a real estate professional for 2025, complete Schedule E, line 43.” Rental income also interacts with the surtax: “Form 8960 to pay Net Investment Income Tax on certain income from your rental and other passive activities.” See the Form 8960 page.

Part II: partnerships and S corporations

“If you are a member of a partnership or joint venture or a shareholder in an S corporation, use Part II to report your share of the partnership or S corporation income (even if not received) or loss.” The source document is the Schedule K-1: “Do not attach Schedules K-1 to your return. Keep them for your records.” The partnership box layout is on the Schedule K-1 (Form 1065) page.

Matching matters: “If you do not follow these instructions, the IRS may send you a notice of additional tax due because the amounts reported by the partnership or S corporation on Schedule K-1 do not match the amounts you reported on your tax return.”

Loss limits apply in order: basis, then at-risk, then passive. For partnerships, “Generally, you may not claim your share of a partnership loss (including a capital loss) to the extent that it is greater than the adjusted basis of your partnership interest at the end of the partnership’s tax year.” “Any losses and deductions not allowed this year because of the basis limit can be carried forward indefinitely and deducted in a later year subject to the basis limit for that year.”

For S corporations, “If you report a loss, receive a distribution, dispose of stock, or receive a loan repayment from an S corporation, you must check the box in column (e) on line 28 and attach the required basis computation.” Separately, “Your share of the net income of an S corporation is not subject to self-employment tax.”

Passive and nonpassive amounts use different columns: “If you have passive activity income, complete Part II, column (h), for that activity. If you have nonpassive income or losses, complete Part II, columns (i) through (k), as appropriate.” Prior-year unallowed losses now deductible are entered on their own line marked PYA in column (a), not netted against current-year amounts.

Parts III, IV and V

Part III is for estates and trusts: “If you are a beneficiary of an estate or trust, use Part III to report your part of the income (even if not received) or loss. You should receive a Schedule K-1 (Form 1041) from the fiduciary.” The box detail is on the Form 1041 K-1 boxes 6 to 9 page and the K-1 for estates page. Inherited rental property is discussed on the heirs inheriting a rental page.

Part IV is short. “If you are the holder of a residual interest in a REMIC, use Part IV to report your total share of the REMIC’s taxable income or loss for each quarter included in your tax year.” “REMIC income or loss is not income or loss from a passive activity.” A holder of a regular interest does not use Schedule E at all.

Part V combines the parts. The form line reads “Total income or (loss). Combine lines 26, 32, 37, 39, and 40.” and the result goes to Schedule 1 (Form 1040), line 5. Selling a rental later moves into other forms, covered on the sell or keep a rental page.

Which revision applies

The edition read for this page is the 2025 Schedule E (Form 1040) and its instructions, which are the revision irs.gov served when they were read on 2026-10-07. A later revision can change line numbers or wording, so check the revision printed on the form you are filling in. “For the latest information about developments related to Schedule E (Form 1040) and its instructions, such as legislation enacted after they were published, go to IRS.gov/ScheduleE.”

Every Schedule E line and part page in one table

Each row links to the page that reads a line, group of lines or part of Schedule E. The right column is the summary each page carries.

Common mistakes

• Deducting the full cost of an improvement as a repair. The instructions treat improvements as amounts to be capitalized and depreciated, with repairs limited to keeping the property in ordinarily efficient operating condition.
• Reporting rent and deducting expenses on a home rented fewer than 15 days after personal use above the 14 day or 10% line. In that case the instructions say not to report the income and not to deduct rental expenses.
• Entering a partnership or S corporation loss without first applying basis, at-risk and passive limits. The Schedule K-1 figure is the starting point, not the deductible amount.

Related: Form 8582, Form 8960, LLC for rental property, and Schedule K-1 (Form 1065).

Sources

• Instructions for Schedule E (Form 1040) (2025): https://www.irs.gov/pub/irs-pdf/i1040se.pdf
• Schedule E (Form 1040) (2025): https://www.irs.gov/pub/irs-pdf/f1040se.pdf

Read from the IRS documents linked above on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.