Schedule E Line by Line for Small Landlords (2026)

Educational only, not tax advice. Rental Money Playbook explains general IRS rules in plain English. The author is not a CPA, enrolled agent, attorney, financial advisor, or tax preparer. The examples below are hypothetical, and your situation may be different.

Last updated: November 12, 2026. Form lines and IRS publications were checked against IRS.gov on that date.

Schedule E, Part I is where most small landlords report residential rental income and expenses. This walk-through is for individual owners of a house, duplex, or short-term property who want to know what each line is for. Line numbers follow the published 2025 form. As of November 12, 2026, the 2026 Schedule E is still a draft, with one notable change on line 13.

Which form, and which year’s form

Use Schedule E (Form 1040) for rental real estate unless a special rule sends you somewhere else. If you provide substantial services that are primarily for the tenant’s or guest’s convenience, such as regular cleaning, changing linen, or maid service, you report on Schedule C, not Schedule E. Substantial services do not include furnishing heat and light, cleaning public areas, or trash collection (Pub. 527, “Schedule C”; 2025 Instructions for Schedule E, Line 3). Do not use Schedule E for a not-for-profit rental, or for personal property rented without real estate.

The published form as of this writing is for 2025. The IRS has also posted a 2026 draft form and draft instructions, labeled “not for filing” (2026 Schedule E, draft; 2026 Schedule E instructions, draft). Lines 5 through 12 and 14 through 26 match the 2025 form. The draft splits what was line 13, “Other interest,” into line 13a, “Vehicle loan,” and line 13b, “Other.” Check the final 2026 form at IRS.gov/ScheduleE before you file or copy totals from a spreadsheet.

The top of Part I: questions A and B, and lines 1 and 2

Questions A and B ask whether you made any payments during the year that would require you to file Form(s) 1099, and if so, whether you did or will file them. The 2026 draft instructions say that, in general, if you paid at least $2,000 for services performed by someone who is not your employee, you must file Form 1099-NEC (2026 Schedule E instructions, draft, Line A). For the details, see the 1099-NEC $2,000 threshold for landlords.

Line 1a is the physical address of each property. Line 1b is a type code: 1 single-family residence, 2 multi-family residence, 3 vacation/short-term rental, 4 commercial, 5 land, 6 royalties, 7 self-rental, or 8 other. Use a separate column for each property. If you have more than three, attach additional Schedules E, but fill in lines 23a through 26 on only one of them, with combined totals (Instructions for Schedule E, Part I). If you own only a part interest, report only your share.

Line 2 asks for fair rental days and personal-use days, and has a QJV box if you and your spouse elect qualified joint venture treatment. A day of personal use includes use by you, by a co-owner, by a family member (with a fair-rental main-home exception), by anyone who pays less than a fair rental price, or by anyone under a reciprocal-use arrangement. Days you spend working substantially full time repairing and maintaining the unit generally do not count as personal use (Instructions for Schedule E, Line 2; Topic no. 415).

You used the unit as a home if personal use was more than the greater of 14 days or 10% of the days it was rented to others at a fair rental price (Topic no. 415). If you used it as a home and rented it fewer than 15 days, do not report the rental income and do not deduct rental expenses. If you used it as a home and rented it 15 days or more, you generally must divide expenses between rental and personal use, and rental deductions may be limited (Pub. 527, chapter 5). Days the unit was only available, but not actually rented, are not rental days for that allocation.

Line 3: rents received (and what else belongs there)

Line 3 is rents received. Most individual landlords are cash-basis taxpayers, so they include rent when they actually or constructively receive it (Pub. 527, “When To Report”; Topic no. 414). Line 3 is not limited to the monthly rent check. Also include, in the year received:

• Advance rent, regardless of the period it covers or the method of accounting you use
• A payment to cancel a lease
• Expenses paid by a tenant that are really your expenses; you also deduct those expenses if they are deductible rental expenses
• The fair market value of property or services received as rent
• The part of a security deposit you keep in that year because the tenant didn’t live up to the lease

Do not include a security deposit when you receive it if you plan to return it at the end of the lease. If an amount called a security deposit is to be used as a final payment of rent, it is advance rent and belongs in income when you receive it (Pub. 527, “Security deposits”; Topic no. 414). Uncollected rent is not a deduction for a cash-basis landlord, because it was never included in income.

Line 4 is for royalties, which most residential landlords will leave blank. If you received services or property instead of money as rent, the instructions say to report the fair market value on line 3 (Instructions for Schedule E, Line 3).

Lines 5 through 17 and 19: ordinary expenses

You can deduct ordinary and necessary expenses of the rental activity, such as taxes, interest, repairs, insurance, management fees, commissions, and depreciation. You cannot deduct the value of your own labor, or amounts paid for capital investments or capital improvements (Instructions for Schedule E, “General Instructions for Lines 5 Through 21”). If you rent out only part of a home, deduct only the part of the expense that applies to the rented portion.

On the 2026 draft form, line 13 is split: line 13a is the business-use portion of vehicle loan interest (allowed under either mileage method), and line 13b is other interest, including mortgage interest not reported to you on a Form 1098 from a bank (2026 Schedule E instructions, draft, Lines 13a and 13b). Don’t deduct the same vehicle loan interest on Schedule E and Schedule 1-A. Confirm the final form before you file.

The repairs line is the one that most often gets mixed with improvements. Pub. 527 says an expense is for an improvement if it results in a betterment, restores the property, or adapts it to a new or different use. Examples include a new roof, a new HVAC system, an addition, and a kitchen modernization. Those costs are generally capitalized and recovered through depreciation, not deducted in full on line 14 (Pub. 527, “Repairs and Improvements”; Instructions for Schedule E, Line 14).

Line 18: depreciation, then lines 20 through 26

Line 18 is depreciation expense or depletion. Land is not depreciable. Depreciation starts when the property is available and ready for use in the rental activity, even if it is vacant, and it ends when you have recovered your depreciable basis or you retire the property from service (Pub. 527, chapter 2; Instructions for Schedule E, Line 18). Residential rental buildings placed in service after 1986 are generally depreciated under MACRS, straight line, over 27.5 years. Appliances, carpeting, and furniture used in a residential rental are generally 5-year property. This article does not figure a depreciation amount. Use Form 4562, and a tax pro if you have one, for property placed in service this year, for a car, and if you claim auto expenses, including the standard mileage rate (Pub. 527, “Form 4562”).

Line 20 is total expenses (lines 5 through 19). Line 21 is rents minus those expenses; use Form 6198 if you have a loss and amounts for which you are not at risk. Line 22 is the deductible rental real estate loss after any passive activity limitation from Form 8582. Rental real estate is generally a passive activity, but an exception may allow up to $25,000 of loss ($12,500 if married filing separately and you lived apart all year) if you actively participated and your modified adjusted gross income is within the phaseout range. Active participation can include approving tenants, rental terms, and repairs, and you must have at least a 10% interest (Pub. 527, “Exception for Rental Real Estate With Active Participation”). Real estate professional status, at-risk rules, and Form 461 can further limit a loss. Lines 23a through 26 combine totals for all properties and, if later parts of Schedule E do not apply, carry Part I to Schedule 1 (Form 1040), line 5.

Hypothetical example: what the lines are for

Hypothetical example (made-up figures, for illustration only): an owner reports one single-family rental with no personal-use days. Line 3 includes rent received plus a security deposit kept for a lease breach. Mortgage interest from a Form 1098 goes on line 12, a lock repair on line 14, property tax on line 16, and owner-paid utilities on line 17. Line 18 is a depreciation amount figured on Form 4562, not in this article. These placements are only an illustration, not typical amounts.

A year-round log of income, expenses, miles, deposits, and contractor totals makes this form easier in April. Our Rental Income & Expense Tracker (Essentials) is coming soon. It maps common categories to Schedule E Part I lines using the 2025 line numbers, and leaves line 18 for you or your tax preparer to enter. Check the current form before you copy any total, especially line 13 on the 2026 return. The tracker is a recordkeeping tool, not tax advice, and it isn’t for sale yet.

Common mistakes

• Leaving a returned security deposit in income, or leaving a kept deposit out. Include only the amount you keep, in the year you keep it, unless the “deposit” is really last month’s rent.
• Calling a new roof or HVAC system a repair. Those are generally improvements, recovered through depreciation.
• Depreciating land, or skipping depreciation on the building. Land is not depreciable; allowed depreciation still reduces basis even if you forget to claim it (Pub. 527, “Claiming the Correct Amount of Depreciation”).
• Skipping line 2 days on a vacation or mixed-use property. Personal-use days can change what you may deduct.
• Deducting your own labor. The instructions do not allow it.

FAQ

Do I report a weekend rental if I rented my home for only 10 days?

If you used the dwelling as a home and rented it for fewer than 15 days, do not report the rental income and do not deduct rental expenses (Topic no. 415; Pub. 527, chapter 5).

Where do booking-platform payouts go?

Pub. 527 says to include in income all amounts you receive as rent, and it lists commissions as a common rental expense (Pub. 527, “Rental Income” and “Types of Expenses”). A common way to apply that is to put gross receipts on line 3 and deduct host-paid cleaning and commissions on the matching expense lines (often line 7, 8, or 11). Ask a tax pro if your statements are already netted.

Should I wait for the final 2026 Schedule E?

Yes, before you file. Draft forms are not for filing (2026 Schedule E, draft). When the final 2026 form is posted, compare the line labels, especially line 13.

Sources

• IRS: About Schedule E (Form 1040)
• IRS Schedule E (Form 1040) (2025)
• IRS 2025 Instructions for Schedule E (Form 1040)
• IRS 2026 Schedule E (Form 1040), early-release draft
• IRS 2026 Instructions for Schedule E (Form 1040), early-release draft
• IRS Publication 527 (2025): Residential Rental Property
• IRS Publication 527 (2025) PDF
• IRS Topic no. 414, Rental income and expenses
• IRS Topic no. 415, Renting residential and vacation property