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Schedule E Lines 20 to 22: Expenses, Income or Loss, Limits

Updated October 18, 2026. Quick answer: Line 20 adds lines 5 through 19 for each property. Line 21 subtracts line 20 from your rents and royalties, and line 22 is the rental real estate loss you can deduct after the passive activity limit. A loss may need Form 6198 for the at-risk rules or Form 8582 for the passive rules.

What lines 20 to 22 ask for

The form captions line 20 as “Total expenses. Add lines 5 through 19”. Line 21 reads “Subtract line 20 from line 3 (rents) and/or 4 (royalties). If result is a (loss), see instructions to find out if you must file Form 6198”. Line 22 reads “Deductible rental real estate loss after limitation, if any, on Form 8582 (see instructions)”. The expense lines they build on are at Schedule E lines 5 to 11 and Schedule E lines 12 to 19, and the schedule as a whole is mapped on the Schedule E (Form 1040) page.

Line 20: total expenses

Line 20 is a sum, and the form’s caption is the rule. The instructions use line 20 in the totals rule: “Enter your total expenses for mortgage interest (line 12), depreciation expenses and depletion (line 18), and total expenses (line 20) on lines 23c through 23e, respectively, even if you have only one property.” Each property column is totaled separately.

Line 21: income or loss for each property

Line 21 is arithmetic. Computed illustration, not an IRS example: a property with $12,000 of rents on line 3 and $9,500 of total expenses on line 20 shows a computed difference of $12,000 minus $9,500 and the computed result is $2,500 on line 21. If the expenses were larger than the rents, line 21 would be a loss.

For a loss, the instructions begin with the at-risk rules: “If you have amounts for which you are not at risk, use Form 6198 to determine the amount of your deductible loss.” “In the space to the left of line 21, enter “Form 6198.” Attach Form 6198 to your return.” The form is explained on the Form 6198 page.

The at-risk rules

The general instruction is “In most cases, you must complete Form 6198 to figure your loss if you have:” “A loss from an activity carried on as a trade or business or for the production of income, and” “Amounts in the activity for which you are not at risk.”

They explain the effect: “The at-risk rules in most cases limit the amount of loss (including loss on the disposition of assets) you can claim to the amount you could actually lose in the activity.” There is an exception for old property: “the at-risk rules do not apply to losses from an activity of holding real property placed in service before 1987.” The instructions send you to “the Instructions for Form 6198 and Pub. 925” for more detail.

Line 22: the passive activity loss limit

The instructions start with a scope rule: “Do not complete line 22 if the amount on line 21 is from royalty properties.” For rentals: “If you have a rental real estate loss from a passive activity (defined earlier), the amount of loss you can deduct may be limited by the passive activity loss rules.” “You may need to complete Form 8582 to figure the amount of loss, if any, to enter on line 22.” The form is explained on the Form 8582 page.

The order of the two limits is stated in the general instructions: “Losses from passive activities may be subject first to the at-risk rules. Losses deductible under the at-risk rules are then subject to the passive activity loss rules.” “You can deduct losses from passive activities in most cases only to the extent of income from passive activities.”

The instructions say a rental is passive by default: “A passive activity is any business activity in which you did not materially participate and any rental activity, except as explained later.” Real estate professionals have a separate rule that the instructions set out in full.

When Form 8582 is not needed

If you meet every condition, “your rental real estate losses are not limited by the passive activity loss rules, and you do not need to complete Form 8582.” The conditions begin with “Rental real estate activities are your only passive activities.” and “You do not have any prior-year unallowed losses from any passive activities.” For an overall net loss they continue with “You actively participated (defined later) in all of the rental real estate activities.” and “Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately).” Another condition is “Your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately).” All of the conditions are listed in the instructions, so read the full list before relying on the exception.

Active participation is defined: “You can meet the active participation requirement without regular, continuous, and substantial involvement in real estate activities.” If the exception applies: “Enter the (loss) from line 21 on line 22.” “If you have an unallowed rental real estate loss from a prior year that after completing Form 8582 you can include this year, include that loss on line 22.”

Where it goes next

Royalty losses stay on line 21 and rental losses move to line 22. The form says line 25 is “Add royalty losses from line 21 and rental real estate losses from line 22.” Line 24 adds “positive amounts shown on line 21.” Those steps and line 26 are on Schedule E lines 23a to 26. The instructions also warn of a separate limit that happens after Schedule E: “Excess business loss rules apply to losses from all noncorporate trades or businesses.” The return the result reaches is explained on the Form 1040 page.

Edition and line numbers

This page reads the 2025 Schedule E (Form 1040) and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are byte-identical to the archived copies and they are the files for the tax year 2025 return, filed in 2026. The schedule says “Attach to Form 1040, 1040-SR, 1040-NR, or 1041.” Schedule E has its own instructions booklet, titled “Instructions for Schedule E” (Form 1040). Check the tax year printed on the schedule you are filling in and use the line numbers on that year’s schedule, because a different year’s schedule can number or word its lines differently.

Common mistakes

  • Entering a loss on line 21 without checking the at-risk rules. The instructions say “If you have amounts for which you are not at risk, use Form 6198 to determine the amount of your deductible loss.”
  • Completing line 22 for royalties. The instructions say “Do not complete line 22 if the amount on line 21 is from royalty properties.”
  • Skipping Form 8582 without checking the conditions. The exception applies only if you meet all of them: “If you do not meet all of these conditions, see the Instructions for Form 8582” to find out whether you must file it.

Related: Schedule E (Form 1040), Form 6198, Form 8582, and Form 1040.

Sources

Read from the IRS documents linked above on October 18, 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.

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