What the Form Is For
IRS Schedule E Form 1040 (2014) is used to report supplemental income or losses from rental real estate, royalties, partnerships, S corporations, estates, trusts, or other pass-through entities. It connects to your main tax return to calculate total income and determine your overall tax liability. Taxpayers file this IRS tax form with their annual income tax return when they have additional income sources beyond wages or self-employment income.
When You’d Use IRS Schedule E Form 1040 (2014)
You must file Schedule E with your 2014 individual income tax return if you received rental income, royalties, farm income, or income from partnerships or trusts. Individuals who amended previous years or received late Schedule K-1 forms should include a corrected Schedule E. This applies to both resident and nonresident aliens who are required to report income from supplemental sources during the tax year.
Key Rules or Details for 2014
- Passive activity loss limit: For tax year 2014, up to $25,000 of passive rental losses could be offset against other taxable income if you actively participated in managing the property.
- Standard mileage rate: The federal government set the 2014 mileage rate for deductible rental real estate travel at 56 cents per mile, helping self-employed landlords calculate vehicle-related deductions.
- At-risk rules: Losses were limited to the actual amounts you could lose from an activity, which prevented inflated deductions when reporting business income or rental income.
- Real estate professionals: If you met the 750-hour requirement and spent most of your working time in real property activities, you could treat losses as non-passive.
- Personal use rule: Rental properties used personally for more than 14 days or 10% of the rental days require an expense allocation between personal and rental use.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Gather tax documents and identify income types
Collect all relevant tax documents, including payment vouchers, bank records, and previous years’ returns. Determine which income types qualify as supplemental income for the tax year, such as rental real estate or royalties.
Step 2: Complete Part I for rental income or royalties
List each property’s address, type, and rental period. Report income received and deductible expenses, including insurance, repairs, taxes, and interest, to find net taxable income or loss.
Step 3: Fill out Parts II through IV for pass-through entities
Enter details from any partnerships, S corporations, or estates using Schedule K-1 forms. Report business income, losses, and foreign tax credit details from these sources as required by the filing process.
Step 4: Apply loss and credit limitations
Calculate passive activity losses, general business credit, and non-refundable credits. Use additional forms, such as Form 6198 and Form 8582, to determine eligible deductions, income credits, and limits.
Step 5: Transfer totals to your main tax form
Combine results and report them on Form 1040 or Form 1040-SR as part of your total income. Attach all additional forms and schedules before completing your annual income tax return.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Mixing repairs and improvements: Repairs are fully deductible in the same tax year, but improvements increasing property value must be depreciated over several years for accurate tax filing.
- Deducting personal use expenses: When household employment taxes or rental expenses include personal use, allocate only the business-related portion to avoid overstating deductions.
- Incorrect depreciation: Land cannot be depreciated; only buildings or equipment qualify. Always separate property value correctly when reporting rental income or business income.
- Ignoring estimated taxes: Taxpayers with supplemental income should make estimated tax payments to avoid additional taxes or penalties on underpaid income tax.
- Overlooking refundable and non-refundable credits: Claim earned income credit, child tax credit, and additional credits if eligible to reduce your overall tax liability.
- Failing to include required schedules: Attach Schedule C, Schedule H, or Schedule R if your income includes self-employment, household employment taxes, or retirement plans.
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 Schedule E with your main tax return, the IRS processes it as part of your overall tax filing. Your reported supplemental income adjusts your total income and determines your taxable income, which directly affects your tax refund or tax liability. The federal government may verify your reported amounts with third-party tax forms such as K-1s or 1099s. If discrepancies arise, the IRS may issue a notice requesting corrections or documentation.
FAQs
What income types must be reported on IRS Schedule E Form 1040 (2014)?
You must report supplemental income from rental real estate, royalties, partnerships, estates, trusts, and other pass-through entities. Include additional income from prior tax years if unreported.
How does income tax apply to household employment taxes on Form 1040?
If you employ household workers, report household employment taxes using Schedule H. These taxes count toward your total income tax liability on your 2014 individual tax return.
Are capital gains included on IRS Schedule E Form 1040 (2014)?
Capital gains are reported separately on Schedule D, but rental real estate sales may create capital gains that affect your overall taxable income and tax filing results.
Can I claim the income credit or earned income credit when filing Form 1040 for 2014?
Yes, if you meet the earned income and filing status requirements, you can claim the Earned Income Credit. Other refundable credits, such as the child tax credit, may also apply.
How do additional taxes and income affect my 2014 tax liability?
Additional income from rental or business activities may increase your tax liability. Additional taxes, such as self-employment tax, must be calculated and reported with your main tax form.
Does income averaging apply to earned income on the 2014 Form 1040?
Income averaging primarily applies to farm income or fishing income, helping to spread taxable income over previous years to reduce your effective income tax rate.
What additional credits or forms may I need with my Form 1040-SR?
Depending on your filing status and age, you may qualify for additional credits or need to attach additional forms, such as Schedule R or Schedule, with your Form 1040-SR.
