Rental income and Schedule E: records to prepare

How rental income is usually reported

Income and expenses from many real estate rentals are generally reported on Schedule E with Form 1040. The exact treatment depends on the type of property and the services provided to tenants.

If substantial services are provided mainly for a tenant's convenience, reporting can be different and may involve Schedule C. That distinction should be reviewed before the return is prepared.

What records to gather

Prepare records of rent received, management fees, insurance, real estate taxes, mortgage interest, repairs, owner-paid utilities, and other property expenses. Keep purchase and closing records and the date the property was placed in service as a rental.

Prior-year depreciation records and documents for major improvements are especially important for basis and depreciation. Improvements and ordinary repairs do not always receive the same tax treatment.

Personal or mixed use

If the property was also used personally, rented for only part of the year, or rented under unusual terms, expense allocation may need separate review. Personal use can affect how much of an expense is deductible.

Keep a clear record of rental periods, personal-use days, income, and expense categories instead of relying only on bank totals.

Before filing

Bring prior-year depreciation information if the property was reported before. If it was newly purchased, converted from personal use, sold, or substantially improved during the year, include the relevant dates and closing or improvement records.