Updated October 18, 2026. Quick answer: Line 3 is the rent you received for each rental property and line 4 is the royalties you received for each royalty property. Rent comes from your own records, including rent paid in services or property, and royalties come from the payer’s statement. Some rentals and some royalty income belong on Schedule C instead.
What lines 3 and 4 ask for
The form captions line 3 as “Rents received” and line 4 as “Royalties received”. They head the income section of Part I, and each property has its own column. The instructions say “Use a separate column (A, B, or C) for each rental property.” and for royalties “Use a separate column (A, B, or C) for each royalty property.” The addresses and codes that label the columns are on Schedule E lines 1a, 1b and 2.
Line 3: rents received
The instructions say “If you received rental income from real estate (including personal property leased with real estate), report the income on line 3.” “Include income received for renting a room or other space.” “Any other income should be included and reported on line 3, with a statement attached to your return.”
Rent need not be cash: “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.” For more detail the instructions point to Pub. 527.
When rental income goes on Schedule C or Form 4835
The instructions draw the line between schedules: “Generally, rental real estate activity is reported on Schedule E even if it is also a trade or business activity; however, if you provided significant services to the renter, such as maid service, report the rental activity on Schedule C, not on Schedule E.” “Significant services do not include the furnishing of heat and light, cleaning of public areas, trash collection, or similar services.” The Schedule C form is mapped on the Schedule C (Form 1040) page.
Personal property is also kept off this form: “Do not use Schedule E to report income and expenses from the rental of personal property, such as equipment or vehicles.” Farm rentals have their own form: “Report farm rental income and expenses on Form 4835 if:” “You received rental income based on crops or livestock produced by the tenant”, and “You did not materially participate in the management or operation of the farm.”
Line 4: royalties received
The instructions list what belongs here: “Report on line 4 royalties from oil, gas, or mineral properties (not including operating interests); copyrights; name, image, and likeness (NIL) rights (such as licensing and merchandising agreements); and patents.”
On the payer’s statement: “If you received $10 or more in royalties during 2025, the payer should send you a Form 1099-MISC or similar statement by January 31, 2026, showing the amount you received. Report this amount on line 4.” The statement is explained on the 1099-MISC box 2 royalties page, and the rent box on the 1099-MISC box 1 rents page.
Gross means before withholding: “Enter on line 4 the gross amount of royalty income, even if state or local taxes were withheld from oil or gas payments you received.” “Include taxes withheld by the producer on line 16.”
When royalty income goes on Schedule C
The instructions say “If you are in business as a self-employed writer, inventor, artist, etc., report your royalty income and expenses on Schedule C, not on Schedule E.” For student-athletes: “If your NIL income is derived from business activities such as sponsorship deals or service income, report your income and expenses on Schedule C, not Schedule E.” “However, if your NIL income is royalty income that is not self-employment income, report the NIL royalty income and expenses on Schedule E.”
Where it goes next
Line 3 and line 4 feed the totals in the middle of Part I. The form captions them “Total of all amounts reported on line 3 for all rental properties” (line 23a) and “Total of all amounts reported on line 4 for all royalty properties” (line 23b), covered at Schedule E lines 23a to 26. Line 21 then subtracts the expenses: the form says “Subtract line 20 from line 3 (rents) and/or 4 (royalties).” That step is on Schedule E lines 20 to 22. The return it 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
- Leaving out rent paid in services or property. The instructions say “report the fair market value of the services or property as rental income on line 3.”
- Reporting a rental with significant services on Schedule E. The instructions say “if you provided significant services to the renter, such as maid service, report the rental activity on Schedule C, not on Schedule E.”
- Entering royalties net of withholding. The instructions say “Enter on line 4 the gross amount of royalty income” even when state or local taxes were withheld.
Related: Schedule E (Form 1040), 1099-MISC box 2 royalties, 1099-MISC box 1 rents, and Schedule C (Form 1040).
Sources
- Instructions for Schedule E (Form 1040), Supplemental Income and Loss (2025): https://www.irs.gov/pub/irs-pdf/i1040se.pdf
- Schedule E (Form 1040), Supplemental Income and Loss (2025): https://www.irs.gov/pub/irs-pdf/f1040se.pdf
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.