Instructions for Schedule E 2013 Checklist
Overview of Schedule E for Tax Year 2013
Schedule E (Form 1040) for tax year 2013 reports income and losses from rental real estate,
royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs.
Schedule E is attached to Form 1040, Form 1040NR, or Form 1041 when reporting these items under the 2013 tax law. For individuals, net farm rental income or loss based on crops or livestock, when you did not materially participate, is first reported on Form 4835 and then carried to Schedule E, line 40.
For 2013, the Net Investment Income Tax may apply to particular rental, royalty, and other passive income, depending on your circumstances, and is calculated on Form 8960 when applicable. Economic Impact Payment programs do not apply to the 2013 tax year. Passive activity loss rules under Internal Revenue Code Section 469 govern rental and pass-through entity reporting.
Ten-Step Checklist
Step 1: Gather Required Information, Statements, and Records
Gather Schedule K-1 forms from partnerships, S corporations, estates, and trusts for the 2013 tax year. Collect Forms 1099-MISC reporting royalty income, along with rental property records such as mortgage interest statements, property tax records, insurance invoices, utility bills, repair expenses, and depreciation records.
These information returns are typically furnished after the close of the tax year, often in early
2014. Confirm that the entity identification numbers and names shown on each Schedule K-1 match the issuing partnership, corporation, estate, or trust.
Step 2: Complete Part I for Rental Real Estate and Royalties
Report each rental property separately in Part I by entering the property information on line 1 and the number of fair rental days and personal use days on line 2. Report rents received on line 3 and royalties received on line 4, as the 2013 Schedule E separates these income categories.
Itemize allowable operating expenses on the appropriate lines, following the categories listed in the 2013 instructions. Exclude nondeductible items such as principal mortgage payments.
Step 3: Report Rental Income, Expenses, and Applicable Loss Limits
Calculate net income or loss for each rental or royalty activity based on reported income and deductible expenses. Passive activity loss rules generally limit deductible losses to passive income.
For certain rental real estate activities with active participation, a special allowance of up to
$25,000 may apply, subject to phaseouts based on modified adjusted gross income and filing status limitations. At-risk rules may further limit losses before passive activity rules apply.
Step 4: Complete Parts II and III for Partnerships and S Corporations
Enter income or loss from each partnership and S corporation separately in Parts II and III using
Schedule K-1 information. Use K-1 amounts as your starting point, then apply any required basis, at-risk, or passive activity limitations when determining allowable amounts.
If you report items inconsistently with a Schedule K-1, follow the required procedures for reporting inconsistent treatment when applicable.
Step 5: Address Farm Rental Income From Form 4835
If you received farm rental income based on crops or livestock produced by a tenant and you did not materially participate, complete Form 4835 to determine net farm rental income or loss.
Enter the net amount from Form 4835 on Schedule E, line 40.
If you materially participated in farming operations or operated a farm business, farm income is generally reported on Schedule F rather than Schedule E.
Step 6: Apply Passive Loss Carryovers and Limitations
Prior-year unallowed passive losses are generally addressed through Form 8582. This form determines whether any portion of the carryover loss is allowable in 2013 based on current-year income and activity. Schedule E reflects only the amount of loss allowed for the year, not the total carryover balance.
Step 7: Report Property Dispositions and Depreciation Recapture
Report gain or loss from the disposition of rental or business property, and any applicable depreciation recapture, on Form 4797 when required. These results flow through to Schedule E through the net income or loss reported for each activity. Attach Form 4797 only when applicable under its instructions.
Step 8: Attach Required Schedules and Forms
Attach Schedule E to Form 1040 if you have reportable income or loss from the activities covered by the schedule. Attach supporting forms such as Form 8582 or Form 4797 only when required. Keep the supporting Schedule K-1 and Form 1099 statements with your records rather than attaching them to the return.
Step 9: Special Considerations for Nonresident Aliens
Nonresident aliens are generally subject to U.S. tax on U.S.-source income and income effectively connected with a U.S. trade or business. Deductions are usually allowed only to the extent connected with effectively connected income, subject to statutory exceptions. Treaty provisions may modify these rules depending on your country of residence.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: Sign and File the Return Properly
Sign and date Form 1040 after completing Schedule E and all required attachments. Include a daytime telephone number in the signature area if available. Use the IRS “Where to File” guidance for Form 1040 to determine the correct mailing address for a paper 2013 return. Keep copies of the filed return and all supporting documents for your records.
Line and Structure Notes for Schedule E 2013
For 2013, Schedule E reports rents on line 3 and royalties on line 4 in Part I. Rental property identification and fair rental and personal use days are reported in Part I, lines 1 and 2. Part IV of Schedule E is reserved for reporting income or loss from REMIC residual interests.
Schedule E line 41 reports total income or loss from all Schedule E activities and is carried to
Form 1040 line 17 for 2013. Passive activity loss computations and carryover determinations are generally made on Form 8582, with Schedule E reflecting the resulting allowed amounts.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
