What is the IRS Schedule E Form 1040 (2013) for
Schedule E Form 1040 (2013) is the IRS tax form used to report supplemental income or loss from rental real estate, royalties, partnerships, S corporations, estates, and trusts. Taxpayers include it with their individual income tax return to report income types not listed on their main tax form. For the 2013 tax year, it helped taxpayers report income accurately, calculate taxable income, and determine tax liability under the federal government’s income tax system.
When You’d Use Form 1040
You must file Schedule E if you receive supplemental income from rental real estate, royalties, or pass-through entities such as partnerships or S corporations. It also applies if you earned farm income, received payments from trusts, or had household employment taxes to report. Late or amended filings use the same schedules attached to Form 1040-X. If your tax return is filed late, you may lose your right to a tax refund after three years from the original filing deadline.
Key Rules or Details for 2013
- Passive Activity Loss Rules: Taxpayers can deduct up to $25,000 in rental real estate losses against other income if they actively participated and had a modified adjusted gross income of less than $100,000.
- Standard Mileage Rate: For 2013, landlords deducting vehicle expenses related to rental property could use a mileage rate of 56.5 cents per mile or actual expenses for tax filing.
- At-Risk Rules: You could only claim losses up to the amount at financial risk. Nonrecourse loans were excluded unless they qualified for real estate, which limited deductions on your individual income tax return.
- Real Estate Professional Exception: Real estate professionals who spent over 750 hours and more than half their working time in property trades were exempt from passive loss limits under income tax rules.
- Foreign Tax Credit: Taxpayers claiming foreign income through partnerships or foreign rental income use Form 1116 to calculate the foreign tax credit, reducing additional taxes owed on their tax return.
- Student Loan Interest Deduction: Individuals who report supplemental income and pay student loan interest may deduct up to $2,500, thereby reducing their taxable income and total income reported to the IRS.
- Estimated Taxes and Payment Voucher: If your supplemental income caused underpayment, you needed to make estimated tax payments using Form 1040-ES and its payment voucher to avoid penalties.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Report Property and Income Information
List each property’s address, ownership type, and number of days rented. Report income from rental real estate, royalties, or partnerships. This establishes total income before applying expenses or deductions.
Step 2: Record Income and Additional Income
Enter all rental income, royalty payments, or your share from pass-through entities. Report interest or ordinary dividends received as additional income that contributes to your annual income tax return.
Step 3: Deduct Allowable Expenses
Include advertising, repairs, management fees, insurance, and depreciation. Each deduction reduces taxable income and self-employment tax when you file taxes for the 2013 tax year.
Step 4: Apply Depreciation and Capital Gains Rules
Depreciate rental property over 27.5 years using Form 4562. If you sold property during the year, report capital gains on Schedule D to ensure correct taxable income reporting.
Step 5: Determine Passive or Active Loss
Use Form 8582 to determine allowable losses. If actively involved in property management, you may claim the special $25,000 allowance and offset additional income.
Step 6: Transfer Figures to Main Tax Form
Carry the totals from Schedule E to your main tax form, Form 1040, line 17. Include other relevant schedules, such as Schedule C for business income or Schedule H for household employment taxes.
Step 7: Attach Additional Forms and File
Attach all supporting tax documents, including Forms 4562, 8582, or 1116. File electronically through the IRS website or mail your paper return to the proper IRS address before the filing deadline.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Reporting Repairs Incorrectly: Many filers classify improvements as repairs. Repairs maintain property condition, while improvements increase value. To avoid this, review IRS guidance and keep separate records for repair and improvement costs.
- Skipping Depreciation: Some taxpayers fail to depreciate their rental property, which can increase future tax liability. Always file Form 4562 to ensure correct deductions and avoid higher additional taxes later.
- Omitting Rental Income: Failing to report rental income can result in penalties for underreporting. Include all income types, including payments for property or services, to maintain compliance with federal income tax rules.
- Failing to Include Estimated Tax Payments: If you made estimated tax payments, ensure they appear on your personal income tax return to avoid overstating the amount you still owe.
- Poor Recordkeeping: Keep all tax documents and receipts for a minimum of three years. Organized records support itemized deductions, additional credits, and proof of legitimate expenses during audits.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After submitting your annual income tax return with Schedule E, the IRS processes your tax forms and verifies the income reported. Refunds are issued within 21 days for e-filed returns or six to eight weeks for paper filings. If you claimed earned income credit, child tax credit, or other refundable credits, the IRS verifies eligibility before issuing refunds. Keep tax returns and supporting records, including proof of estimated taxes and income averaging worksheets, for a minimum of three years.
FAQs
What income is reported on IRS Schedule E Form 1040 (2013)?
Taxpayers report supplemental income such as rental income, royalties, and partnership distributions. This form is used with the main tax form to calculate total income and determine tax liability.
How do household employment taxes affect my income tax filing?
If you hired household employees like nannies or caregivers, you must file Schedule H with your personal income tax return. These wages contribute to total income and impact taxable income.
How does the income credit, IT, or earned income credit work with supplemental income?
Earned income credit reduces tax liability for lower-income filers. Those reporting additional self-employment income must meet earned income limits to qualify for this income credit.
Can I use income averaging or report capital gains from property sales?
Yes, Schedule D allows income averaging for certain types of income and capital gains reporting. You must report property sales, dividends, and gains under the same schedules used for your 2013 tax return.
How do I include additional income or earned income from self-employment in my tax return?
Report additional income and earned income on Schedule C or Schedule SE. This includes business income, farm income, and self-employment tax amounts that influence total taxes owed.
What additional credits can reduce my tax liability on the 1040 Form or Form 1040-SR?
You may claim non-refundable credits, refundable credits, or general business credit. Additional credits, like education credits or retirement plan deductions, reduce your overall federal income tax.
