Instructions for IRS Form 1040 Schedule E - Supplemental Income and Loss 2018

January 1, 2018 "Instructions For Irs Form 1040 Schedule E - Supplemental Income And Loss" contain the latest filing requirements for the IRS-issued Form 1040. Download your copy of the instructions by clicking the link below.

IRS Form 1040 is a tax form issued by the United States Internal Revenue Service.

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Department of the Treasury
Internal Revenue Service
2018 Instructions for Schedule E (Form 1040)
Supplemental
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.
Income and Loss
You can attach your own schedule(s) to report income or loss from any of these
sources. Use the same format as on Schedule E.
Enter separately on Schedule E the total income and the total loss for each part. En-
close loss figures in (parentheses).
Section references are to the Internal
businesses plus 20% of the aggregate
Form 4562 to claim depreciation
Revenue Code unless otherwise noted.
amount of qualified real estate invest-
(including the special allowance) on
Future Developments
ment trust (REIT) dividends and quali-
assets placed in service in 2018, to claim
fied publicly traded partnership income.
amortization that began in 2018, to
For the latest information about devel-
The deduction is subject to various limi-
make an election under section 179 to
opments related to Schedule E (Form
tations, such as limitations based on the
expense certain property, or to report
1040) and its instructions, such as legis-
type of your trade or business, your tax-
information on listed property.
lation enacted after they were published,
able income, the amount of W-2 wages
Form 4684 to report a casualty or
go to IRS.gov/ScheduleE.
paid with respect to the qualified trade
theft gain or loss involving property
or business, and the unadjusted basis of
used in your trade or business or
qualified property held by your trade or
income-producing property.
What's New
business. You will claim this deduction
Form 4797 to report sales,
on Form 1040, not on Schedule E. Un-
exchanges, and involuntary conversions
Excess farm loss limitation. The ex-
like other deductions, this deduction can
(not from a casualty or theft) of trade or
cess farm loss rules do not apply in
be taken in addition to the standard or
business property.
2018. However, if you had an excess
itemized deductions. For more informa-
Form 6198 to apply a limitation to
farm loss in 2017, you may be able to
tion, see the Instructions for Form 1040
your loss from an at-risk activity.
deduct it in 2018. See
Losses Not Al-
and Pub. 535.
Form 8082 to notify the IRS of any
lowed in Prior Years Due to the Basis,
inconsistent tax treatment for an item on
Business interest expense limitation.
Excess Farm Loss, or At-Risk
Rules, lat-
your return.
For tax years beginning after 2017, your
er, for more information.
Form 8582 to apply a limitation to
business interest expense deduction may
Excess business loss limitation. If you
your loss from passive activities.
be limited. See
Limitation on business
report a loss on line 26, 32, 37, or 39 of
Form 8824 to report like-kind
interest
under Lines 12 and 13, later, for
your Schedule E (Form 1040), you may
exchanges.
more information.
be subject to a new business loss limita-
Form 8826 to claim a credit for
Standard mileage rate. The standard
tion. The disallowed loss resulting from
expenditures to improve access to your
mileage rate for miles driven in connec-
this new limitation will not be reflected
business for individuals with disabilities.
tion with your rental activities increased
on line 26, 32, 37, or 39 of your Sched-
Form 8873 to figure your
to 54.5 cents a mile.
ule E. Instead, use new Form 461 to de-
extraterritorial income exclusion.
termine the amount of your excess busi-
Form 8910 to claim a credit for
General
ness loss, which will be included as
placing a new alternative motor vehicle
Instructions
income on Schedule 1 (Form 1040),
in service for business use.
line 21. Any disallowed loss resulting
Form 8960 to pay Net Investment
Other Schedules and Forms
from this limitation will be treated as a
Income Tax on certain income from
net operating loss that must be carried
your rental and other passive activities.
You May Have To File
forward and deducted in a subsequent
Form 8990 to determine whether
Schedule A (Form 1040) to deduct
year.
your business interest deduction is
interest, taxes, and casualty losses not
limited.
See Form 461 and its instructions for
related to your business.
details on the excess business loss limi-
Also, see the Qualified Business Income
Form 461 to report your excess
Deduction Worksheet in the Instructions
tation.
business loss.
for Form 1040 or Pub. 535 to figure a
Deduction for qualified business in-
Form 3520 to report certain
deduction for qualified business income.
come.
For tax years beginning after
transactions with foreign trusts and
2017, you may be entitled to a deduction
Single-member limited liability com-
receipt of certain large gifts or bequests
of up to 20% of your qualified business
pany (LLC). In most cases, a sin-
from certain foreign persons.
income from your qualified trade or
gle-member domestic LLC is not treated
E-1
Dec 04, 2018
Cat. No. 24332T
Department of the Treasury
Internal Revenue Service
2018 Instructions for Schedule E (Form 1040)
Supplemental
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.
Income and Loss
You can attach your own schedule(s) to report income or loss from any of these
sources. Use the same format as on Schedule E.
Enter separately on Schedule E the total income and the total loss for each part. En-
close loss figures in (parentheses).
Section references are to the Internal
businesses plus 20% of the aggregate
Form 4562 to claim depreciation
Revenue Code unless otherwise noted.
amount of qualified real estate invest-
(including the special allowance) on
Future Developments
ment trust (REIT) dividends and quali-
assets placed in service in 2018, to claim
fied publicly traded partnership income.
amortization that began in 2018, to
For the latest information about devel-
The deduction is subject to various limi-
make an election under section 179 to
opments related to Schedule E (Form
tations, such as limitations based on the
expense certain property, or to report
1040) and its instructions, such as legis-
type of your trade or business, your tax-
information on listed property.
lation enacted after they were published,
able income, the amount of W-2 wages
Form 4684 to report a casualty or
go to IRS.gov/ScheduleE.
paid with respect to the qualified trade
theft gain or loss involving property
or business, and the unadjusted basis of
used in your trade or business or
qualified property held by your trade or
income-producing property.
What's New
business. You will claim this deduction
Form 4797 to report sales,
on Form 1040, not on Schedule E. Un-
exchanges, and involuntary conversions
Excess farm loss limitation. The ex-
like other deductions, this deduction can
(not from a casualty or theft) of trade or
cess farm loss rules do not apply in
be taken in addition to the standard or
business property.
2018. However, if you had an excess
itemized deductions. For more informa-
Form 6198 to apply a limitation to
farm loss in 2017, you may be able to
tion, see the Instructions for Form 1040
your loss from an at-risk activity.
deduct it in 2018. See
Losses Not Al-
and Pub. 535.
Form 8082 to notify the IRS of any
lowed in Prior Years Due to the Basis,
inconsistent tax treatment for an item on
Business interest expense limitation.
Excess Farm Loss, or At-Risk
Rules, lat-
your return.
For tax years beginning after 2017, your
er, for more information.
Form 8582 to apply a limitation to
business interest expense deduction may
Excess business loss limitation. If you
your loss from passive activities.
be limited. See
Limitation on business
report a loss on line 26, 32, 37, or 39 of
Form 8824 to report like-kind
interest
under Lines 12 and 13, later, for
your Schedule E (Form 1040), you may
exchanges.
more information.
be subject to a new business loss limita-
Form 8826 to claim a credit for
Standard mileage rate. The standard
tion. The disallowed loss resulting from
expenditures to improve access to your
mileage rate for miles driven in connec-
this new limitation will not be reflected
business for individuals with disabilities.
tion with your rental activities increased
on line 26, 32, 37, or 39 of your Sched-
Form 8873 to figure your
to 54.5 cents a mile.
ule E. Instead, use new Form 461 to de-
extraterritorial income exclusion.
termine the amount of your excess busi-
Form 8910 to claim a credit for
General
ness loss, which will be included as
placing a new alternative motor vehicle
Instructions
income on Schedule 1 (Form 1040),
in service for business use.
line 21. Any disallowed loss resulting
Form 8960 to pay Net Investment
Other Schedules and Forms
from this limitation will be treated as a
Income Tax on certain income from
net operating loss that must be carried
your rental and other passive activities.
You May Have To File
forward and deducted in a subsequent
Form 8990 to determine whether
Schedule A (Form 1040) to deduct
year.
your business interest deduction is
interest, taxes, and casualty losses not
limited.
See Form 461 and its instructions for
related to your business.
details on the excess business loss limi-
Also, see the Qualified Business Income
Form 461 to report your excess
Deduction Worksheet in the Instructions
tation.
business loss.
for Form 1040 or Pub. 535 to figure a
Deduction for qualified business in-
Form 3520 to report certain
deduction for qualified business income.
come.
For tax years beginning after
transactions with foreign trusts and
2017, you may be entitled to a deduction
Single-member limited liability com-
receipt of certain large gifts or bequests
of up to 20% of your qualified business
pany (LLC). In most cases, a sin-
from certain foreign persons.
income from your qualified trade or
gle-member domestic LLC is not treated
E-1
Dec 04, 2018
Cat. No. 24332T
as a separate entity for federal income
in accordance with your respective inter-
Any listed transaction that is the
tax purposes. If you are the sole member
ests in the venture. Although you and
same as or substantially similar to tax
of a domestic LLC, file Schedule E (or
your spouse will not each file your own
avoidance transactions identified by the
Schedule C, C-EZ, or F, if applicable).
Schedule E as part of the qualified joint
IRS.
However, you can elect to treat a domes-
venture, each of you must report your
Any transaction offered to you or a
tic LLC as a corporation. See Form 8832
interest as separate properties on line 1
related party under conditions of confi-
for details on the election and the tax
of Schedule E. On lines 3 through 22 for
dentiality for which you paid an advisor
treatment of a foreign LLC.
each separate property interest, you must
a fee of at least $50,000.
enter your share of the applicable in-
Certain transactions for which you
Information returns. You may have to
come, deduction, or loss.
or a related party have contractual pro-
file information returns for wages paid
tection against disallowance of the tax
to employees, certain payments of fees
If you have more than three rental re-
benefits.
and other nonemployee compensation,
al estate or royalty properties, complete
Certain transactions resulting in a
interest, rents, royalties, real estate trans-
and attach as many Schedules E as you
loss of at least $2 million in any single
actions, annuities, and pensions. You
need to list them. But fill in lines 23a
tax year or $4 million in any combina-
generally use Form 1099-MISC, Miscel-
through 26 on only one Schedule E. The
tion of tax years (at least $50,000 for a
laneous Income, to report rents and pay-
figures on lines 23a through 26 on that
single tax year if the loss arose from a
ments of fees and other nonemployee
Schedule E should be the combined to-
foreign currency transaction defined in
compensation. For details, see
Line
A,
tals for all properties reported on your
section 988(c)(1), whether or not the
later, and the 2018 General Instructions
Schedules E.
loss flows through from an S corpora-
for Certain Information Returns.
Once made, the election can be re-
tion or partnership).
If you received cash of more than
voked only with the permission of the
Certain transactions of interest en-
$10,000 in one or more related transac-
IRS. However, the election technically
tered into after November 1, 2006, that
tions in your trade or business, you may
remains in effect only for as long as the
are the same or substantially similar to
have to file Form 8300. For details, see
spouses filing as a qualified joint ven-
transactions that the IRS has identified
Pub. 1544.
ture continue to meet the requirements
by notice, regulation, or other form of
to be treated as a qualified joint venture.
Qualified Joint Venture
published guidance as transactions of in-
If the spouses fail to meet the qualified
terest.
If you and your spouse each materially
joint venture requirements for a year, a
See the Instructions for Form 8886
participate (see Material participation in
new election will be necessary for any
for more details.
the Instructions for Schedule C) as the
future year in which the spouses meet
Limitation on Losses
only members of a jointly owned and
the requirements to be treated as a quali-
operated rental real estate business and
fied joint venture.
If you report a loss from rental real es-
you file a joint return for the tax year,
Rental real estate income generally is
tate or royalties in Part I, a loss from a
you can elect to be treated as a qualified
not included in net earnings from
partnership or S corporation in Part II, or
joint venture instead of a partnership.
self-employment subject to self-employ-
a loss from an estate or trust in Part III,
This election, in most cases, will not in-
ment tax and generally is subject to pas-
your loss may be reduced or not allowed
crease the total tax owed on the joint re-
sive loss limitation rules. Electing quali-
this year. You must apply the following
turn. By making the election, you will
fied joint venture status does not alter
rules to your loss.
not be required to file Form 1065 for
the application of the self-employment
Basis rules apply to losses from a
any year the election is in effect and will
tax or the passive loss limitation rules.
partnership or S corporation. See
Basis
instead report the income and deduc-
For more information on qualified
rules for partnerships
and
Basis rules
tions directly on your joint return. If you
joint ventures, go to IRS.gov/QJV.
for S
corporations, later, in Part II.
and your spouse filed Form 1065 for the
Reportable Transaction
At-risk rules apply to losses from
year prior to the election, the partnership
rental real estate or royalties. They also
terminates at the end of the tax year im-
Disclosure Statement
apply to losses from a partnership, S
mediately preceding the year the elec-
corporation, estate, or trust. See
At-Risk
Use Form 8886 to disclose information
tion takes effect.
Rules, later, in the General Instructions.
for each reportable transaction in which
Note. Mere joint ownership of property
If the loss is from a partnership or S
you participated. Form 8886 must be
corporation, also see
At-risk
rules, later,
that is not a trade or business does not
filed for each tax year that your federal
in Part II.
qualify for the election.
income tax liability is affected by your
Passive activity loss rules apply to
participation in the transaction. You may
Making the election. To make this
losses from rental real estate. They also
have to pay a penalty if you are required
election for your rental real estate busi-
apply to losses from a partnership, S
to file Form 8886 but do not do so. You
ness, check the “QJV” box on line 2 for
corporation, estate, or trust. See
Passive
also may have to pay interest and penal-
each property that is part of the qualified
Activity Loss
Rules, later, in the General
ties on any reportable transaction under-
joint venture. You must divide all items
Instructions. If the loss is from a
statements. The following are reportable
of income, gain, loss, deduction, and
partnership or S corporation, also see
transactions.
credit attributable to the rental real estate
Passive activity loss
rules, later, in Part
business between you and your spouse
II.
E-2
Passive Activity
Excess business loss rules apply to
Amounts borrowed for use in the
losses from all noncorporate trades or
activity from a person who has an inter-
A passive activity is any business activi-
businesses. This loss limitation is
est in the activity (other than as a cred-
ty in which you did not materially par-
figured using Form 461 after you
itor) or who is related under section
ticipate and any rental activity, except as
complete your Schedule E. Any
465(b)(3)(C) to a person (other than
explained later. If you are a limited part-
limitation to your loss resulting from
you) having such an interest.
ner, in most cases, you are not treated as
these rules will not be reflected on your
Qualified
nonrecourse
financing.
having materially participated in the
Schedule E. Instead, it will be added to
Qualified nonrecourse financing is trea-
partnership's activities for the year.
your income on Form 1040 and treated
ted as an amount at risk if it is secured
The rental of real or personal proper-
as a net operating loss that must be
by real property used in an activity of
ty is a rental activity under the passive
carried forward and deducted in a
holding real property subject to the
activity loss rules in most cases, but ex-
subsequent year. These rules also apply
at-risk rules. Qualified nonrecourse fi-
ceptions apply. If your rental of property
to losses from a partnership or S
nancing is financing for which no one is
is not treated as a rental activity, you
corporation. See
Excess business loss
personally liable for repayment and is:
must determine whether it is a trade or
rules, later, in Part II.
Borrowed by you in connection
business activity, and if so, whether you
At-Risk Rules
with the activity of holding real property
materially participated in the activity for
(other than mineral property),
the tax year.
In most cases, you must complete Form
Not convertible from a debt obli-
6198 to figure your loss if you have:
See the Instructions for Form 8582 to
gation to an ownership interest, and
A loss from an activity carried on
determine whether you materially par-
Loaned or guaranteed by any fed-
as a trade or business or for the produc-
ticipated in the activity and for the defi-
eral, state, or local government, or bor-
tion of income, and
nition of “rental activity.”
rowed by you from a qualified person.
Amounts in the activity for which
See Pub. 925 for special rules that ap-
Qualified person. A qualified person
you are not at risk.
ply to rentals of:
is a person who actively and regularly
Substantially nondepreciable prop-
The at-risk rules in most cases limit
engages in the business of lending mon-
erty,
the amount of loss (including loss on the
ey, such as a bank or savings and loan
Property incidental to development
disposition of assets) you can claim to
association. A qualified person cannot
activities, and
the amount you could actually lose in
be:
Property related to activities in
the activity. However, the at-risk rules
Related to you (unless the nonre-
which you materially participate.
do not apply to losses from an activity of
course financing obtained is commer-
holding real property placed in service
cially reasonable and on substantially
Activities That Are Not Passive
before 1987. They also do not apply to
the same terms as loans involving unre-
Activities
losses from your interest acquired before
lated persons),
1987 in a pass-through entity engaged in
The seller of the property (or a per-
Activities of real estate professionals.
such activity. The activity of holding
son related to the seller), or
If you were a real estate professional for
mineral property does not qualify for
A person who receives a fee due to
2018, any rental real estate activity in
this exception.
your investment in real property (or a
which you materially participated is not
person related to that person).
In most cases, you are not at risk for
a passive activity. You were a real estate
amounts such as the following.
More information. For more details
professional for the year only if you met
Nonrecourse loans used to finance
about the at-risk rules, see the Instruc-
both of the following conditions.
the activity, to acquire property used in
tions for Form 6198 and Pub. 925.
More than half of the personal
the activity, or to acquire your interest in
services you performed in trades or busi-
Passive Activity Loss Rules
the activity that are not secured by your
nesses during the year were performed
own property (other than property used
The passive activity loss rules may limit
in real property trades or businesses in
in the activity). However, there is an ex-
the amount of losses you can deduct.
which you materially participated.
ception for certain nonrecourse financ-
These rules apply to losses in Parts I, II,
You performed more than 750
ing borrowed by you in connection with
and III, and line 40 of Schedule E.
hours of services during the year in real
the activity of holding real property
property trades or businesses in which
Losses from passive activities may be
(other than mineral property). See
you materially participated.
subject first to the at-risk rules. Losses
Qualified nonrecourse
financing, later.
If you are married filing jointly, ei-
deductible under the at-risk rules are
Cash,
property,
or
borrowed
ther you or your spouse must meet both
then subject to the passive activity loss
amounts used in the activity (or contrib-
of the above conditions without taking
rules.
uted to the activity, or used to acquire
into account services performed by the
your interest in the activity) that are pro-
You can deduct losses from passive
other spouse.
tected against loss by a guarantee,
activities in most cases only to the ex-
A real property trade or business is
stop-loss agreement, or other similar ar-
tent of income from passive activities.
any real property development, redevel-
rangement (excluding casualty insurance
An
Exception for Certain Rental Real
opment, construction, reconstruction, ac-
and insurance against tort liability).
Estate Activities
(explained later) may
quisition, conversion, rental, operation,
apply.
E-3
Exception for Certain Rental Real
management, leasing, or brokerage trade
se's interest) in the activity was less than
Estate Activities
or business. Services you performed as
10% by value of all interests in the ac-
an employee are not treated as per-
tivity. If you are a limited partner, you
If you meet all of the following condi-
formed in a real property trade or busi-
also are not treated as actively partici-
tions, your rental real estate losses are
ness unless you owned more than 5% of
pating in a partnership's rental real estate
not limited by the passive activity loss
the stock (or more than 5% of the capital
activities.
rules, and you do not need to complete
or profits interest) in the employer.
Modified adjusted gross income. This
Form 8582. If you do not meet all of
If you qualify as a real estate profes-
is your adjusted gross income from
these conditions, see the Instructions for
sional, rental real estate activities in
Form 1040, line 7, or Form 1040NR,
Form 8582 to find out if you must com-
which you materially participated are
line 37, without taking into account:
plete and attach Form 8582 to figure any
not passive activities. For purposes of
Any allowable passive activity
losses allowed.
determining whether you materially par-
loss,
1. Rental real estate activities are
ticipated in your rental real estate activi-
Rental real estate losses allowed
your only passive activities.
ties, each interest in rental real estate is a
for real estate professionals (see
Activi-
2. You do not have any prior year
separate activity unless you elect to treat
ties of real estate
professionals, earlier),
unallowed losses from any passive ac-
all your interests in rental real estate as
Taxable social security or tier 1
tivities.
one activity. To make this election, at-
railroad retirement benefits,
tach a statement to your original tax re-
Deductible contributions to a tradi-
3. All of the following apply if you
turn that declares you are a qualifying
tional IRA or certain other qualified re-
have an overall net loss from these ac-
taxpayer for the year and you are mak-
tirement plans under section 219,
tivities:
ing the election under section 469(c)(7)
The student loan interest deduc-
a. You
actively participated
(defined
(A). The election applies for the year
tion,
later) in all of the rental real estate activ-
made and all later years in which you
The domestic production activities
ities;
are a real estate professional. You can
deduction,
b. If married filing separately, you
revoke the election only if your facts
The deduction for one-half of
lived apart from your spouse all year;
and circumstances materially change.
self-employment tax,
c. Your overall net loss from these
The exclusion from income of in-
If you did not make this elec-
activities is $25,000 or less ($12,500 or
terest from series EE and I U.S. savings
tion on your timely filed return,
TIP
less if married filing separately);
bonds used to pay higher education ex-
you may be eligible to make a
penses, and
d. You have no current or prior year
late election to treat all your interest in
Any excluded amounts under an
unallowed credits from passive activi-
rental real estate as one activity. See
employer's adoption assistance program.
ties;
Rev. Proc. 2011-34, 2011-24 I.R.B. 875,
Recordkeeping
e. Your
modified adjusted gross in-
available
at
IRS.gov/irb/
come
(defined later) is $100,000 or less
2011-24_IRB#RP-2011-34.
You must keep records to support items
($50,000 or less if married filing sepa-
If you were a real estate professional for
reported on Schedule E in case the IRS
rately); and
2018, complete Schedule E, line 43.
has questions about them. If the IRS ex-
f. You do not hold any interest in a
amines your tax return, you may be
Other activities. The rental of a dwell-
rental real estate activity as a limited
asked to explain the items reported.
ing unit that you used as a home is not
partner or as a beneficiary of an estate or
Good records will help you explain any
subject to the passive loss limitation
a trust.
item and arrive at the correct tax with a
rules. See
Line
2, later, to see if you
minimum of effort. If you do not have
used the dwelling unit as a home.
Active participation. You can meet the
records, you may have to spend time
A working interest in an oil or gas
active participation requirement without
getting statements and receipts from var-
well you held directly or through an en-
regular, continuous, and substantial in-
ious sources. If you cannot produce the
tity that did not limit your liability is not
volvement in real estate activities. But
correct documents, you may have to pay
a passive activity even if you did not
you must have participated in making
additional tax and be subject to penal-
materially participate.
management decisions or arranging for
ties.
others to provide services (such as re-
Royalty income not derived in the or-
pairs) in a significant and bona fide
dinary course of a trade or business re-
sense. Such management decisions in-
Specific
ported on Schedule E in most cases is
clude:
not considered income from a passive
Instructions
Approving new tenants,
activity.
Deciding on rental terms,
For more details on passive activities,
Approving capital or repair expen-
Filers of Form 1041. If you are a fidu-
see the Instructions for Form 8582 and
ditures, and
ciary filing Schedule E with Form 1041,
Pub. 925.
Other similar decisions.
enter the estate's or trust's employer
identification number (EIN) in the space
You are not considered to actively
for “Your social security number.”
participate if, at any time during the tax
year, your interest (including your spou-
E-4
If you have more than three rental re-
Line 1a
Part I
al estate or royalty properties, complete
For rental real estate property only,
and attach as many Schedules E as you
Before you begin, see
Line 3
need to list them. But answer lines A
show the street address, city or town,
!
and
Line
4, later, to determine
state, and ZIP code. If the property is lo-
and B and fill in lines 23a through 26 on
if you should report your rental
cated in a foreign country, enter the city,
only one Schedule E. The figures on
CAUTION
real estate and royalty income on Sched-
province or state, country, and postal
lines 23a through 26 on that Schedule E
ule C, Schedule C-EZ, or Form 4835, in-
code.
should be the combined totals for all
stead of Schedule E.
properties reported on your Schedules E.
Line 1b
If you also are using page 2 of Sched-
Line A
Enter one of the codes listed under
ule E, use the same Schedule E on
“Type of Property” in Part I of the form.
which you entered the combined totals
If you made any payments in 2018 that
for Part I.
Land rental. Enter code “5” for rental
would require you to file any Forms
of land. For details about the tax treat-
Personal property. Do not use Sched-
1099, check the “Yes” box. Otherwise,
ment of income from this type of rental
ule E to report income and expenses
check the “No” box. See the 2018 Gen-
property, see Rental of Nondepreciable
from the rental of personal property,
eral Instructions for Certain Information
Property in Pub. 925.
such as equipment or vehicles. Instead,
Returns if you are unsure whether you
use Schedule C or C-EZ if you are in the
Self-rental. Enter
code
“7”
for
were required to file any Forms 1099.
business of renting personal property.
self-rental if you rent property to a trade
Also, see the separate instructions for
You are in the business of renting per-
or business in which you materially par-
each Form 1099.
sonal property if the primary purpose for
ticipated. See Rental of Property to a
Generally, you must file Form
renting the property is income or profit
Nonpassive Activity in Pub. 925 for de-
1099-MISC if you paid at least
and you are involved in the rental activi-
TIP
tails about the tax treatment of income
$600 in rents, services, prizes,
ty with continuity and regularity.
from this type of rental property.
medical and health care payments, and
If your rental of personal property is
Other. Enter code “8” if the property is
other income payments. The Guide to
not a business, see the instructions for
not one of the other types listed on the
Information Returns in the 2018 Gener-
Schedule 1 (Form 1040), lines 21 and
form. Attach a statement to your return
al Instructions for Certain Information
36, to find out how to report the income
describing the property.
Returns has more information, including
and expenses.
the due dates for the various information
Line 2
Extraterritorial
income
exclusion.
returns. You can find more information
Except as otherwise provided in the In-
If you rented out a dwelling unit that
at IRS.gov/Form1099.
ternal Revenue Code, gross income in-
you also used for personal purposes dur-
Income or Loss From
cludes all income from whatever source
ing the year, you may not be able to de-
derived. Gross income, however, does
duct all the expenses for the rental part.
Rental Real Estate and
not include extraterritorial income that is
“Dwelling unit” (unit) means a house,
Royalties
qualifying foreign trade income under
apartment, condominium, mobile home,
certain circumstances. Use Form 8873 to
boat, or similar property.
Use Part I to report the following.
figure the extraterritorial income exclu-
For each property listed on line 1a,
Income and expenses from rental
sion. Report it on Schedule E as ex-
report the number of days in the year
real estate (including personal property
plained in the Instructions for Form
each property was rented at fair rental
leased with real estate).
8873.
value and the number of days of person-
Royalty income and expenses.
Chapter 11 bankruptcy cases. If you
al use.
For an estate or trust only, farm
were a debtor in a chapter 11 bankruptcy
rental income and expenses based on
case, see Chapter 11 Bankruptcy Cases
A day of personal use is any day, or
crops or livestock produced by the ten-
under Income in the Instructions for
part of a day, that the unit was used by:
ant. Estates and trusts do not use Form
Form 1040.
You for personal purposes,
4835 or Schedule F (Form 1040) for this
Any other person for personal pur-
Income you report on Sched-
purpose.
poses, if that person owns part of the
ule E may be qualified business
TIP
If you own a part interest in a rental
unit (unless rented to that person under a
income and entitle you to a de-
real estate property, report only your
“shared equity” financing agreement),
duction on Form 1040, line 9. Be sure to
part of the income and expenses on
Anyone in your family (or in the
use the Qualified Business Income De-
Schedule E.
family of someone else who owns part
duction Worksheet in the Instructions
of the unit), unless the unit is rented at a
for Form 1040 or Pub. 535 to figure
Complete lines 1a, 1b, and 2 for each
fair rental price to that person as his or
your deduction, if any.
rental real estate property. For royalty
her main home,
property, enter code “6” on line 1b and
Anyone who pays less than a fair
leave lines 1a and 2 blank for that prop-
rental price for the unit, or
erty.
Anyone under an agreement that
lets you use some other unit.
E-5

Download Instructions for IRS Form 1040 Schedule E - Supplemental Income and Loss 2018

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