Department of the Treasury

Internal Revenue Service

2021 Instructions for Schedule E

Supplemental
Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties,
partnerships, S corporations, estates, trusts, and residual interests in REMICs.

Income and Loss You can attach your own schedule(s) to report income or loss from any of these
sources. Use the same format as on Schedule E.
Enter separately on Schedule E the total income and the total loss for each part. En-
close loss figures in (parentheses).

Section references are to the Internal ule E. Instead, use Form 461 to deter- that were previously enacted under the
Revenue Code unless otherwise noted. mine the amount of your excess business FFCRA and amended and extended by
Future Developments loss, which will be included as income
on Schedule 1 (Form 1040), line 8o.
the COVID-related Tax Relief Act of
2020. The credits under sections 3131
For the latest information about devel- Any disallowed loss resulting from this and 3132 are available for qualified
opments related to Schedule E (Form limitation will be treated as a net operat- leave wages paid for leave taken after
1040) and its instructions, such as legis- ing loss that must be carried forward and March 31, 2021, and before October 1,
lation enacted after they were published, deducted in a subsequent year. 2021.
go to IRS.gov/ScheduleE.
See Form 461 and its instructions for
details on the excess business loss limi-
tation. Reminder
What's New Paycheck Protection Program (PPP) Self-employed tax payments deferred
Standard mileage rate. The standard Safe Harbor. Rev. Proc. 2021-20 has from 2020. If you elected to defer
mileage rate for miles driven in connec- allowed for a safe harbor for certain tax- self-employed tax payments from 2020,
tion with your rental activities decreased payers who did not deduct certain other- see How self-employed individuals and
to 56 cents a mile. wise deductible expenses paid or incur- household employers repay deferred
Figuring a shareholder’s stock and red during the tax year(s) ending after Social Security tax.
debt basis. See the new Form 7203 and March 26, 2020, and on or before De-

General
its separate instructions, which have cember 31, 2020, that resulted in, or
been developed to replace the 3-part were expected to result in, forgiveness
Worksheet for Figuring a Shareholder’s of the loan. To find more information,
including requirements, of this safe har-
Instructions
Stock and Debt Basis and its related in-
structions formerly found in the Share- bor, see Rev. Proc. 2021-20. Other Schedules and Forms
holder’s Instructions for Schedule K-1 The COVID-19 related credit for You May Have To File
qualified sick and family leave wages.
(Form 1120-S).
The Families First Coronavirus Re-
• Schedule A (Form 1040) to deduct
Credits for self-employed persons. interest, taxes, and casualty losses not
Refundable credits are available to cer- sponse Act (FFCRA) was amended by related to your business.
recent legislation. The FFCRA require-
tain self-employed persons impacted by
ment that employers provide paid sick
• Form 461 to report an excess
the coronavirus. See the Instructions for business loss.
and family leave for reasons related to
Form 7202, Credit for Sick Leave and
COVID-19 (the employer mandate) ex-
• Form 941 to report the employer
Family Leave for Certain Self-Em- share and employee share of social
ployed Individuals, for more informa- pired on December 31, 2020; however, security tax and Medicare tax, withheld
tion. the COVID-related Tax Relief Act of federal income tax, and, if applicable,
2020 extends the periods for which em- withheld Additional Medicare Tax.
Business meal expense. For a limited ployers providing leave that otherwise
time, business meals are 100% deducti- meets the requirements of the FFCRA
• Form 944 for smallest employers
ble under certain conditions. See Line 6, (those whose annual liability for social
may continue to claim tax credits for security, Medicare, and withheld federal
later, for more information. qualified sick and family leave wages income taxes are $1,000 or less) to file
Excess business loss limitation. If you paid for leave taken before April 1, and pay these taxes only once a year
report a loss on line 26, 32, 37, or 39 of 2021. instead of every quarter.
your Schedule E (Form 1040), you may
be subject to a business loss limitation.
The American Rescue Plan Act of • Form 3520 to report certain
2021 (the ARP) adds new sections 3131 transactions with foreign trusts and
The disallowed loss resulting from the and 3132 to the Internal Revenue Code receipt of certain large gifts or bequests
limitation will not be reflected on to provide credits for qualified sick and from certain foreign persons.
line 26, 32, 37, or 39 of your Sched- family leave wages similar to the credits
E-1
Sep 28, 2021 Cat. No. 24332T
 • Form 4562 to claim depreciation to employees, certain payments of fees interest as separate properties on line 1
and amortization (including information and other nonemployee compensation, of Schedule E. On lines 3 through 22 for
on listed property) on assets placed in interest, rents, royalties, real estate trans- each separate property interest, you must
service in 2021, to claim amortization actions, annuities, and pensions. For de- enter your share of the applicable in-
that began in 2021, to make an election tails, see Line A, later, and the 2021 come, deduction, or loss.
under section 179 to expense certain General Instructions for Certain Infor- If you have more than three rental re-
property, or to report information on mation Returns. al estate or royalty properties, complete
listed property. If you received cash of more than and attach as many Schedules E as you
• Form 4684 to report a casualty or $10,000 in one or more related transac- need to list them. But fill in lines 23a
theft gain or loss involving property tions in your trade or business, you may through 26 on only one Schedule E. The
used in your trade or business or have to file Form 8300. For details, see figures on lines 23a through 26 on that
income-producing property. Pub. 1544. Schedule E should be the combined to-
• Form 4797 to report sales, tals for all properties reported on your
exchanges, and involuntary conversions Qualified Joint Venture Schedules E.
(not from a casualty or theft) of trade or If you and your spouse each materially Once made, the election can be re-
business property. participate (see Material participation in voked only with the permission of the
• Form 6198 to apply a limitation to the Instructions for Schedule C) as the IRS. However, the election technically
your loss from an at-risk activity. only members of a jointly owned and remains in effect only for as long as the
• Form 7203 to figure potential operated rental real estate business and spouses filing as a qualified joint ven-
limitations of your share of the S you file a joint return for the tax year, ture continue to meet the requirements
corporation's deductions, credits, and you can elect to be treated as a qualified to be treated as a qualified joint venture.
other items that can be deducted on your joint venture instead of a partnership. If the spouses fail to meet the qualified
return. This election, in most cases, will not in- joint venture requirements for a year, a
• Form 8082 to notify the IRS of any crease the total tax owed on the joint re- new election will be necessary for any
inconsistent tax treatment for an item on turn. By making the election, you will future year in which the spouses meet
your return. not be required to file Form 1065 for the requirements to be treated as a quali-
• Form 8582 to apply a limitation to any year the election is in effect and will fied joint venture.
your loss from passive activities. instead report the income and deduc-
• Form 8824 to report like-kind tions directly on your joint return. If you Rental real estate income is generally
exchanges. and your spouse filed Form 1065 for the not included in net earnings from
• Form 8826 to claim a credit for year prior to the election, the partnership self-employment subject to self-employ-
expenditures to improve access to your terminates at the end of the tax year im- ment tax and is generally subject to pas-
business for individuals with disabilities. mediately preceding the year the elec- sive loss limitation rules. Electing quali-
• Form 8873 to figure your tion takes effect. fied joint venture status does not alter
extraterritorial income exclusion. the application of the self-employment
• Form 8910 to claim a credit for Note. Mere joint ownership of property tax or the passive loss limitation rules.
placing a new alternative motor vehicle that is not a trade or business does not For more information on qualified
in service for business use. qualify for the election. joint ventures, go to IRS.gov/QJV.
• Form 8960 to pay Net Investment Only businesses that are owned Reportable Transaction
Income Tax on certain income from
your rental and other passive activities. ! and operated by spouses as
CAUTION co-owners (and not in the name
Disclosure Statement
• Form 8990 to determine whether of a state law entity) qualify for the elec- Use Form 8886 to disclose information
your business interest deduction is tion. Thus, a business owned and oper- for each reportable transaction in which
limited. ated by spouses through an LLC does you participated. Form 8886 must be
• Form 8995 or 8995-A to claim a not qualify for the election of a qualified filed for each tax year that your federal
deduction for qualified business income. joint venture. income tax liability is affected by your
Single-member limited liability com- participation in the transaction. You may
pany (LLC). In most cases, a sin- Making the election. To make this have to pay a penalty if you are required
gle-member domestic LLC is not treated election for your rental real estate busi- to file Form 8886 but do not do so. You
as a separate entity for federal income ness, check the “QJV” box on line 2 for may also have to pay interest and penal-
tax purposes. If you are the sole member each property that is part of the qualified ties on any reportable transaction under-
of a domestic LLC, file Schedule E (or joint venture. You must divide all items statements. The following are reportable
Schedule C or F, if applicable). Howev- of income, gain, loss, deduction, and transactions.
er, you can elect to treat a domestic LLC credit attributable to the rental real estate • Any listed transaction that is the
as a corporation. See Form 8832 for de- business between you and your spouse same as or substantially similar to tax
tails on the election and the tax treat- in accordance with your respective inter- avoidance transactions identified by the
ment of a foreign LLC. ests in the venture. Although you and IRS.
Information returns. You may have to your spouse will not each file your own • Any transaction offered to you or a
file information returns for wages paid Schedule E as part of the qualified joint related party under conditions of confi-
venture, each of you must report your

E-2
dentiality for which you paid an advisor Schedule E. Instead, it will be included by real property used in an activity of
a fee of at least $50,000. as income on Schedule 1 (Form 1040), holding real property subject to the
• Certain transactions for which you line 8o, and treated as a net operating at-risk rules. Qualified nonrecourse fi-
or a related party have contractual pro- loss that must be carried forward and nancing is financing for which no one is
tection against disallowance of the tax deducted in a subsequent year. These personally liable for repayment and is:
benefits. rules also apply to losses from a • Borrowed by you in connection
• Certain transactions resulting in a partnership or S corporation. with the activity of holding real property
loss of at least $2 million in any single (other than mineral property);
At-Risk Rules
tax year or $4 million in any combina- • Not convertible from a debt obli-
tion of tax years (at least $50,000 for a In most cases, you must complete Form gation to an ownership interest; and
single tax year if the loss arose from a 6198 to figure your loss if you have: • Loaned or guaranteed by any fed-
foreign currency transaction defined in • A loss from an activity carried on eral, state, or local government, or bor-
section 988(c)(1), whether or not the as a trade or business or for the produc- rowed by you from a qualified person.
loss flows through from an S corpora- tion of income, and
Qualified person. A qualified person
tion or partnership). • Amounts in the activity for which is a person who actively and regularly
• Certain transactions of interest en- you are not at risk.
engages in the business of lending mon-
tered into that are the same or substan- The at-risk rules in most cases limit ey, such as a bank or savings and loan
tially similar to transactions that the IRS the amount of loss (including loss on the association. A qualified person cannot
has identified by notice, regulation, or disposition of assets) you can claim to be:
other form of published guidance as
transactions of interest.
the amount you could actually lose in • Related to you (unless the nonre-
the activity. However, the at-risk rules course financing obtained is commer-
See the Instructions for Form 8886 do not apply to losses from an activity of cially reasonable and on substantially
for more details. holding real property placed in service the same terms as loans involving unre-
Limitation on Losses before 1987. They also do not apply to lated persons),
If you report a loss from rental real es-
losses from your interest acquired before • The seller of the property (or a per-
1987 in a pass-through entity engaged in son related to the seller), or
tate or royalties in Part I, a loss from a
partnership or S corporation in Part II, or
such activity. The activity of holding • A person who receives a fee due to
mineral property does not qualify for your investment in real property (or a
a loss from an estate or trust in Part III, this exception. person related to that person).
your loss may be reduced or not allowed
this year. You must apply the following In most cases, you are not at risk for More information. For more details
rules to your loss. amounts such as the following. about the at-risk rules, see the Instruc-
• Basis rules apply to losses from a • Nonrecourse loans used to finance tions for Form 6198 and Pub. 925.
the activity, to acquire property used in
partnership or S corporation. See Basis Passive Activity Loss Rules
rules for partnerships and Basis rules the activity, or to acquire your interest in
the activity that are not secured by your The passive activity loss rules may limit
for S corporations, later, in Part II.
the amount of losses you can deduct.
• At-risk rules apply to losses from own property (other than property used
in the activity). However, there is an ex- These rules apply to losses in Parts I, II,
rental real estate or royalties. They also
ception for certain nonrecourse financ- and III, and line 40 of Schedule E.
apply to losses from a partnership, S
corporation, estate, or trust. See At-Risk ing borrowed by you in connection with Losses from passive activities may be
Rules, later, in the General Instructions. the activity of holding real property subject first to the at-risk rules. Losses
If the loss is from a partnership or S (other than mineral property). See deductible under the at-risk rules are
corporation, also see At-risk rules, later, Qualified nonrecourse financing, later. then subject to the passive activity loss
in Part II. • Cash, property, or borrowed rules.
• Passive activity loss rules apply to amounts used in the activity (or contrib-
uted to the activity, or used to acquire You can deduct losses from passive
losses from rental real estate. They also
your interest in the activity) that are pro- activities in most cases only to the ex-
apply to losses from a partnership, S
tected against loss by a guarantee, tent of income from passive activities.
corporation, estate, or trust. See Passive
stop-loss agreement, or other similar ar- An exception for certain rental real es-
Activity Loss Rules, later, in the General
rangement (excluding casualty insurance tate activities (explained later) may ap-
Instructions. If the loss is from a
and insurance against tort liability). ply.
partnership or S corporation, also see
Passive activity loss rules, later, in Part • Amounts borrowed for use in the
II. activity from a person who has an inter- Passive Activity
• Excess business loss rules apply to est in the activity (other than as a cred-
itor) or who is related under section
A passive activity is any business activi-
losses from all noncorporate trades or ty in which you did not materially par-
businesses. This loss limitation is 465(b)(3)(C) to a person (other than ticipate and any rental activity, except as
figured using Form 461 after you you) having such an interest. explained later. If you are a limited part-
complete your Schedule E. Any Qualified nonrecourse financing. ner, in most cases, you are not treated as
limitation to your loss resulting from Qualified nonrecourse financing is trea- having materially participated in the
these rules will not be reflected on your ted as an amount at risk if it is secured partnership's activities for the year.

E-3
 The rental of real or personal proper- which you materially participated are 1. Rental real estate activities are
ty is a rental activity under the passive not passive activities. For purposes of your only passive activities.
activity loss rules in most cases, but ex- determining whether you materially par- 2. You do not have any prior year
ceptions apply. If your rental of property ticipated in your rental real estate activi- unallowed losses from any passive ac-
is not treated as a rental activity, you ties, each interest in rental real estate is a tivities.
must determine whether it is a trade or separate activity unless you elect to treat
3. All of the following apply if you
business activity and, if so, whether you all your interests in rental real estate as
have an overall net loss from these ac-
materially participated in the activity for one activity. To make this election, at-
tivities.
the tax year. tach a statement to your original tax re-
turn that declares you are a qualifying a. You actively participated (defined
See the Instructions for Form 8582 to
taxpayer for the year and you are mak- later) in all of the rental real estate activ-
determine whether you materially par-
ing the election under section 469(c)(7) ities.
ticipated in the activity and for the defi-
nition of “rental activity.” (A). The election applies for the year b. If married filing separately, you
made and all later years in which you lived apart from your spouse all year.
See Pub. 925 for special rules that ap-
are a real estate professional. You can c. Your overall net loss from these
ply to rentals of:
revoke the election only if your facts
• Substantially nondepreciable prop- and circumstances materially change.
activities is $25,000 or less ($12,500 or
erty, less if married filing separately).
• Property incidental to development If you did not make this elec- d. You have no current or prior year
activities, and TIP tion on your timely filed return, unallowed credits from passive activi-
• Property related to activities in you may be eligible to make a ties.
which you materially participate. late election to treat all your interest in e. Your modified adjusted gross in-
rental real estate as one activity. See come (defined later) is $100,000 or less
Activities That Are Not Passive Rev. Proc. 2011-34, 2011-24 I.R.B. 875, ($50,000 or less if married filing sepa-
Activities available at IRS.gov/irb/ rately).
2011-24_IRB#RP-2011-34.
Activities of real estate professionals. f. You do not hold any interest in a
If you were a real estate professional for rental real estate activity as a limited
If you were a real estate professional for
2021, complete Schedule E, line 43. partner or as a beneficiary of an estate or
2021, any rental real estate activity in
which you materially participated is not Other activities. The rental of a dwell- a trust.
a passive activity. You were a real estate ing unit that you used as a home is not
subject to the passive loss limitation Active participation. You can meet the
professional for the year only if you met
rules. See Line 2, later, to see if you active participation requirement without
both of the following conditions.
regular, continuous, and substantial in-
• More than half of the personal used the dwelling unit as a home.
volvement in real estate activities. But
services you performed in trades or busi- A working interest in an oil or gas
you must have participated in making
nesses during the year were performed well you held directly or through an en-
management decisions or arranging for
in real property trades or businesses in tity that did not limit your liability is not
others to provide services (such as re-
which you materially participated. a passive activity even if you did not
pairs) in a significant and bona fide
• You performed more than 750 materially participate.
sense. Such management decisions in-
hours of services during the year in real Royalty income not derived in the or- clude:
property trades or businesses in which
you materially participated.
dinary course of a trade or business re- • Approving new tenants,
ported on Schedule E in most cases is • Deciding on rental terms,
If you are married filing jointly, ei-
ther you or your spouse must meet both
not considered income from a passive • Approving capital or repair expen-
activity. ditures, and
of the above conditions without taking
into account services performed by the
For more details on passive activities, • Other similar decisions.
see the Instructions for Form 8582 and You are not considered to actively
other spouse. Pub. 925. participate if, at any time during the tax
A real property trade or business is year, your interest (including your spou-
any real property development, redevel- Exception for Certain Rental Real se's interest) in the activity was less than
opment, construction, reconstruction, ac- Estate Activities 10% by value of all interests in the ac-
quisition, conversion, rental, operation, tivity. If you are a limited partner, you
management, leasing, or brokerage trade If you meet all of the following condi-
tions, your rental real estate losses are are also not treated as actively partici-
or business. Services you performed as pating in a partnership's rental real estate
an employee are not treated as per- not limited by the passive activity loss
rules, and you do not need to complete activities.
formed in a real property trade or busi-
Form 8582. If you do not meet all of Modified adjusted gross income. This
ness unless you owned more than 5% of
these conditions, see the Instructions for is your adjusted gross income from
the stock (or more than 5% of the capital
Form 8582 to find out if you must com- Form 1040, 1040-SR, or Form
or profits interest) in the employer.
plete and attach Form 8582 to figure any 1040-NR, line 11, without taking into
If you qualify as a real estate profes- losses allowed. account:
sional, rental real estate activities in

E-4
 • Any allowable passive activity crops or livestock produced by the ten-
loss, Part I ant. Estates and trusts do not use Form
• Rental real estate losses allowed 4835 or Schedule F (Form 1040) for this
for real estate professionals (see Activi- Before you begin, see Line 3 purpose.
ties of real estate professionals, earlier), ! and Line 4, later, to determine
If you own a part interest in a rental
• Taxable social security or tier 1 CAUTION if you should report your rental

real estate property, report only your

railroad retirement benefits, real estate and royalty income on Sched-
• Deductible contributions to a tradi- ule C or Form 4835, instead of Sched- part of the income and expenses on
tional IRA or certain other qualified re- ule E. Schedule E.
tirement plans under section 219, Complete lines 1a, 1b, and 2 for each
Credits for qualified sick and family
• The student loan interest deduc- leave wages and credits for employee rental real estate property. For royalty
tion, property, enter code “6” on line 1b and
retention. If you claimed credits for
• The deduction for one-half of qualified sick and family leave wages on leave lines 1a and 2 blank for that prop-
self-employment tax, erty.
Form 944 or Form(s) 941 for employees
• The exclusion from income of in- of your rental or royalty activities, report
terest from series EE and I U.S. savings If you have more than three rental re-
the nonrefundable and refundable por-
bonds used to pay higher education ex- al estate or royalty properties, complete
tions of those credits as income on line 3
penses, and attach as many Schedules E as you
or line 4, as applicable. If you claimed
• Any excluded amounts under an the employee retention credit taken on need to list them. But answer lines A
employer's adoption assistance program, and B and fill in lines 23a through 26 on
Form 944 or Form(s) 941 for employees
and only one Schedule E. The figures on
of your rental or royalty activities, re-
• The deduction allowed for for- duce your deduction for wages by the lines 23a through 26 on that Schedule E
eign-derived intangible income and should be the combined totals for all
nonrefundable and refundable portions
global intangible low-taxed income. properties reported on your Schedules E.
of the credit. Do not reduce your deduc-
If you are also using page 2 of Sched-
Recordkeeping tion for social security and Medicare
taxes on line 16 by either of these credit ule E, use the same Schedule E on
You must keep records to support items which you entered the combined totals
reported on Schedule E in case the IRS amounts.
for Part I.
has questions about them. If the IRS ex-
amines your tax return, you may be Line A Personal property. Do not use Sched-
ule E to report income and expenses
asked to explain the items reported. If you made any payments in 2021 that from the rental of personal property,
Good records will help you explain any would require you to file any Forms such as equipment or vehicles. Instead,
item and arrive at the correct tax with a 1099, check the “Yes” box. Otherwise, use Schedule C if you are in the business
minimum of effort. If you do not have check the “No” box. In general, if you of renting personal property. You are in
records, you may have to spend time paid at least $600 for services performed the business of renting personal property
getting statements and receipts from var- by someone who is not your employee if the primary purpose for renting the
ious sources. If you cannot produce the (nonemployee compensation), you must property is income or profit and you are
correct documents, you may have to pay file Form 1099-NEC; and, you generally involved in the rental activity with con-
additional tax and be subject to penal- must file Form 1099-MISC if you paid tinuity and regularity.
ties. at least $600 in rents, prizes, medical
and health care payments, or other mis- If your rental of personal property is
cellaneous amounts that would be in- not a business, see the instructions for

Specific come to the person receiving them. See Schedule 1 (Form 1040), lines 8k and
24b, to find out how to report the in-
Instructions
the 2021 General Instructions for Cer-
tain Information Returns if you are un- come and expenses.
sure whether you were required to file Extraterritorial income exclusion.
Filers of Form 1041. If you are a fidu-
any Forms 1099. Also, see the separate Except as otherwise provided in the In-
ciary filing Schedule E with Form 1041,
instructions for each Form 1099. ternal Revenue Code, gross income in-
enter the estate's or trust's employer
cludes all income from whatever source
identification number (EIN) in the space
for “Your social security number.”
Income or Loss From derived. Gross income, however, does
Rental Real Estate and not include extraterritorial income that is
qualifying foreign trade income under
Royalties certain circumstances. Use Form 8873 to
Use Part I to report the following. figure the extraterritorial income exclu-
• Income and expenses from rental sion. Report it on Schedule E as ex-
real estate (including personal property plained in the Instructions for Form
leased with real estate). 8873.
• Royalty income and expenses. Chapter 11 bankruptcy cases. If you
• For an estate or trust only, farm were a debtor in a chapter 11 bankruptcy
rental income and expenses based on case, see Chapter 11 Bankruptcy Cases

E-5
under Income in the Instructions for unit (unless rented to that person under a used your property for personal use for
Form 1040. “shared equity” financing agreement); 7 days and rented it for 63 days. In most
Income you report on Sched- • Anyone in your family (or in the cases, 10% (7 ÷ 70) of your expenses
family of someone else who owns part are not rental expenses and cannot be
TIP ule E may be qualified business
of the unit), unless the unit is rented at a deducted on Schedule E.
income and entitle you to a de-
fair rental price to that person as his or
duction on Form 1040, 1040-SR, or QJV. Check the box for “QJV” if you
her main home;
1040-NR. See the Instructions for Form owned the property as a member of a
8995-A for more information about this • Anyone who pays less than a fair qualified joint venture reporting income
rental price for the unit; or
deduction. not subject to self-employment tax. See
• Anyone under an agreement that Qualified Joint Venture, earlier.
lets you use some other unit.
Line 1a
For rental real estate property only,
Do not count as personal use: Line 3
show the street address, city or town,
• Any day you spent working sub- If you received rental income from real
stantially full time repairing and main-
state, and ZIP code. If the property is lo- estate (including personal property
taining the unit, even if family members
cated in a foreign country, enter the city, leased with real estate), report the in-
used it for recreational purposes on that
province or state, country, and postal come on line 3. Use a separate column
day; or
code. (A, B, or C) for each rental property. In-
• Any days you used the unit as your clude income received for renting a
Line 1b main home before or after renting it or
room or other space.
offering it for rent, if you rented or tried
Enter one of the codes listed under to rent it for at least 12 consecutive Any other income should be included
“Type of Property” in Part I of the form. months (or for a period of less than 12 and reported on line 3, with a statement
Land rental. Enter code “5” for rental consecutive months at the end of which attached to your return.
of land. For details about the tax treat- you sold or exchanged it).
ment of income from this type of rental If you received services or property
property, see Rental of Nondepreciable Whether or not you can deduct ex- instead of money as rent, report the fair
Property in Pub. 925 . penses for the unit depends on whether market value of the services or property
or not you used the unit as a home in as rental income on line 3.
Self-rental. Enter code “7” for 2021. You used the unit as a home if
self-rental if you rent property to a trade your personal use of the unit was more Generally, rental real estate activity is
or business in which you materially par- than the greater of: reported on Schedule E even if it is also
ticipated. See Rental of Property to a a trade or business activity; however, if
Nonpassive Activity in Pub. 925 for de-
• 14 days, or you provided significant services to the
tails about the tax treatment of income
• 10% of the total days it was rented renter, such as maid service, report the
to others at a fair rental price.
from this type of rental property. rental activity on Schedule C, not on
Other. Enter code “8” if the property is If you did not use the unit as a home, Schedule E. Significant services do not
not one of the other types listed on the you can deduct all your expenses for the include the furnishing of heat and light,
form. Attach a statement to your return rental part, subject to the at-risk rules cleaning of public areas, trash collec-
describing the property. and the passive activity loss rules ex- tion, or similar services.
plained earlier.
If you were a real estate dealer, in-
Line 2 If you did use the unit as a home and clude only the rent received from real
If you rented out a dwelling unit that rented the unit out for fewer than 15 estate (including personal property
you also used for personal purposes dur- days in 2021, do not report the rental in- leased with this real estate) you held for
ing the year, you may not be able to de- come and do not deduct any rental ex- the primary purpose of renting to pro-
duct all the expenses for the rental part. penses. If you itemize deductions on duce income. Do not use Schedule E to
“Dwelling unit” (unit) means a house, Schedule A, you can deduct allowable report income and expenses from rentals
apartment, condominium, mobile home, interest, taxes, and casualty losses. of real estate you held for sale to cus-
boat, or similar property. If you did use the unit as a home and tomers in the ordinary course of your
rented the unit out for 15 or more days business as a real estate dealer. Instead,
For each property listed on line 1a, use Schedule C for those rentals.
report the number of days in the year in 2021, you may not be able to deduct
each property was rented at fair rental all your rental expenses. See Pub. 527 For more details on rental income,
value and the number of days of person- for more information. see Pub. 527.
al use. Regardless of whether you used Rental income from farm production

A day of personal use is any day, or

! the unit as a home, expenses
CAUTION related to days of personal use
or crop shares. Report farm rental in-
come and expenses on Form 4835 if:
part of a day, that the unit was used by: do not qualify as rental expenses. You • You are an individual,
• You for personal purposes; must allocate your expenses based on • You received rental income based
• Any other person for personal pur- the number of days of personal use to to- on crops or livestock produced by the
poses, if that person owns part of the tal use of the property. For example, you tenant, and

E-6
 • You did not materially participate incurred in 2021 to provide access to If you claim any auto expenses (ac-
in the management or operation of the your business for individuals with disa- tual or the standard mileage rate), you
farm. bilities. See Form 8826 for details. must complete Part V of Form 4562 and
You can also elect to deduct up to attach Form 4562 to your tax return.
Line 4 $15,000 of qualified costs paid or incur- See Pub. 527 and Pub. 463 for de-
Report on line 4 royalties from oil, gas, red in 2021 to remove architectural or tails.
or mineral properties (not including op- transportation barriers to individuals
with disabilities and the elderly.
erating interests); copyrights; and pat- Line 10
ents. Use a separate column (A, B, or C) You cannot take both the credit and
for each royalty property. Include on line 10 fees for tax advice
the deduction for the same expenditures.
and the preparation of tax forms related
If you received $10 or more in royal- to your rental real estate or royalty prop-
ties during 2021, the payer should send Line 6 erties.
you a Form 1099-MISC or similar state- You can deduct ordinary and necessary
ment by February 1, 2022, showing the auto and travel expenses related to your Do not deduct legal fees paid or in-
amount you received. Report this rental activities, including 50% of meal curred to defend or protect title to prop-
amount on line 4. expenses incurred while traveling away erty, to recover property, or to develop
from home. However, business meals or improve property. Instead, you must
If you are in business as a self-em- are 100% deductible if the meals are capitalize these fees and add them to the
ployed writer, inventor, artist, etc., re- food and beverages provided by a res- property's basis.
port your royalty income and expenses taurant and paid or incurred after De-
on Schedule C, not on Schedule E. cember 31, 2020, and before January 1, Lines 12 and 13
You may be able to treat amounts re- 2023. In most cases, you can either de- In most cases, to determine the interest
ceived as “royalties” for the transfer of a duct your actual expenses or take the expense allocable to your rental activi-
patent or amounts received on the dis- standard mileage rate. You must use ac- ties, you must have records to show how
posal of coal and iron ore as the sale of a tual expenses if you used more than four the proceeds of each debt were used.
capital asset. For details, see Pub. 544. vehicles simultaneously in your rental Specific tracing rules apply for allocat-
activities (as in fleet operations). You ing debt proceeds and repayment. See
Enter on line 4 the gross amount of cannot use actual expenses for a leased Pub. 535 for details.
royalty income, even if state or local vehicle if you previously used the stand-
taxes were withheld from oil or gas pay- Limitation on business interest. Inter-
ard mileage rate for that vehicle.
ments you received. Include taxes with- est you paid as part of your rental real
held by the producer on line 16. You can use the standard mileage estate activity is not subject to the limi-
rate for 2021 only if you: tation on business interest unless your
General Instructions for • Owned the vehicle and used the rental real estate activity is a trade or
business. If your rental real estate activi-
Lines 5 Through 21 standard mileage rate for the first year
ty is a trade or business, you must file
you placed the vehicle in service; or
Enter your rental and royalty expenses • Leased the vehicle and are using Form 8990 to deduct any interest expen-
for each property in the appropriate col- the standard mileage rate for the entire ses of that rental real estate activity un-
umn. You can deduct all ordinary and lease period (except the period, if any, less you meet one of the filing excep-
necessary expenses, such as taxes, inter- before 1998). tions listed in the Instructions for Form
est, repairs, insurance, management fees, 8990.
agents' commissions, and depreciation. If you take the standard mileage rate, If the interest you paid in your rental
multiply the number of miles driven in real estate trade or business is limited,
Do not deduct the value of your own connection with your rental activities by
labor or amounts paid for capital invest- figure the limit on your business interest
56 cents a mile. Include this amount and expenses on Form 8990 before complet-
ments or capital improvements. your parking fees and tolls on line 6. ing lines 12 and 13. Follow the instruc-
Enter your total expenses for mort- You cannot deduct rental or tions under How to report, later, but re-
gage interest (line 12), depreciation ex- port the reduced interest on lines 12 and
penses and depletion (line 18), and total
! lease payments, depreciation,
CAUTION or your actual auto expenses if 13. The interest you can't deduct this
expenses (line 20) on lines 23c through you use the standard mileage rate. year will carry forward to next year on
23e, respectively, even if you have only Form 8990.
one property. If your real estate activity is not a
If you deduct actual auto expenses:
Renting out part of your home. If you • Include on line 6 the rental activity trade or business or you meet one of the
rent out only part of your home or other portion of the cost of gasoline, oil, re- filing exceptions for Form 8990, follow
property, deduct the part of your expen- pairs, insurance, tires, license plates, the instructions under How to report,
ses that applies to the rented part. etc.; and later, and report all of your deductible
Credit or deduction for access expen- • Show auto rental or lease pay- interest on lines 12 and 13.
ditures. You may be able to claim a tax ments on line 19 and depreciation on How to report. If you have a mortgage
credit for eligible expenditures paid or line 18. on your rental property, enter on line 12

E-7
the amount of interest you paid for 2021 year they are paid or incurred). See the land and the buildings to figure the
to banks or other financial institutions. Line 18, later. basis for depreciation of the buildings.
Do not deduct prepaid interest when The part of the cost that you allocate to
you paid it. You can deduct it only in the Line 17 each asset is the ratio of the fair market
year to which it is properly allocable. You can deduct the cost of ordinary and value of that asset to the fair market val-
Points, including loan origination fees, necessary telephone calls related to your ue of the whole property at the time you
charged only for the use of money must rental activities or royalty income (for buy it.
be deducted over the life of the loan. example, calls to the renter). However, If you are not certain of the fair mar-
If you paid $600 or more in interest the base rate (including taxes and other ket values of the land and the buildings,
on a mortgage during 2021, the recipient charges) for local telephone service for you can divide the cost between them
should send you a Form 1098 or similar the first telephone line into your resi- based on their assessed values for real
statement by February 1, 2022, showing dence is a personal expense and is not estate tax purposes.
the total interest received from you. deductible.
If you paid more mortgage interest
Line 19
than is shown on your Form 1098 or Line 18 Enter on line 19 any ordinary and neces-
similar statement, see Pub. 535 to find Depreciation is the annual deduction sary expenses not listed on lines 5
out if you can deduct part or all of the you must take to recover the cost or oth- through 18.
additional interest. If you can, enter the er basis of business or investment prop-
You may be able to deduct, on
entire deductible amount on line 12. At- erty having a useful life substantially be-
line 19, part or all of the cost of modify-
tach a statement to your return explain- yond the tax year. Land is not deprecia-
ing existing commercial buildings to
ing the difference. In the space to the ble.
make them energy efficient. For details,
left of line 12, enter “See attached.” Depreciation starts when you first use see section 179D, Notice 2006-52, No-
Note. If the recipient was not a finan- the property in your business or for the tice 2008-40, and Notice 2012-26. You
production of income. It ends when you can find Notice 2006-52 on page 1175
cial institution or you did not receive a
deduct all your depreciable cost or other of Internal Revenue Bulletin 2006-26 at
Form 1098 from the recipient, report
basis or no longer use the property in Notice 2006-52. You can find Notice
your deductible mortgage interest on
your business or for the production of 2008-40 on page 725 of Internal Reve-
line 13.
income. nue Bulletin 2008-14 at Notice 2008-40.
If you and at least one other person You can find Notice 2012-26 on
(other than your spouse if you file a joint See the Instructions for Form 4562 to
figure the amount of depreciation to en- page 847 of Internal Revenue Bulletin
return) were liable for and paid interest 2012-17 at Notice 2012-26.
on the mortgage, and the other person ter on line 18.
received Form 1098, report your share You must complete and attach Form Line 21
of the deductible interest on line 13. At- 4562 only if you are claiming:
If you have amounts for which you are
tach a statement to your return showing • Depreciation on property first not at risk, use Form 6198 to determine
the name and address of the person who placed in service during 2021;
the amount of your deductible loss. En-
received Form 1098. On the dotted line • Depreciation on listed property ter that amount in the appropriate col-
next to line 13, enter “See attached.” (defined in the Instructions for Form
umn of Schedule E, line 21. In the space
4562), including a vehicle, regardless of
Line 14 the date it was placed in service; or
to the left of line 21, enter “Form 6198.”
Attach Form 6198 to your return. For
You can deduct the amounts paid for re- • A section 179 expense deduction details on the at-risk rules, see At-Risk
pairs and maintenance. However, you or amortization of costs that began in
Rules, earlier.
cannot deduct the cost of improvements. 2021.
Repairs and maintenance costs are those See Pub. 527 for more information on Line 22
costs that keep the property in an ordina- depreciation of residential rental proper-
rily efficient operating condition. Exam- Do not complete line 22 if the amount
ty. See Pub. 946 for a more comprehen-
ples are fixing a broken lock or painting on line 21 is from royalty properties.
sive guide to depreciation.
a room. If you have a rental real estate loss
If you have an economic interest in
In contrast, improvements are mineral property, you may be able to from a passive activity (defined earlier),
amounts paid to better or restore your take a deduction for depletion. Mineral the amount of loss you can deduct may
property or adapt it to a new or different property includes oil and gas wells, be limited by the passive activity loss
use. Examples of improvements are add- mines, and other natural deposits (in- rules. You may need to complete Form
ing substantial insulation or replacing an cluding geothermal deposits). See Pub. 8582 to figure the amount of loss, if any,
entire HVAC system. Amounts paid to 535 for details. to enter on line 22. See the Instructions
improve your property must generally for Form 8582 to determine if your loss
Separating cost of land and buildings. is limited.
be capitalized and depreciated (that is, If you buy buildings and your cost in-
they cannot be deducted in full in the cludes the cost of the land on which they If your rental real estate loss is not
stand, you must divide the cost between from a passive activity or you meet the

E-8
exception for certain rental real estate ule K-1, see your tax return instructions from you to the corporation. The basis
activities (explained earlier), you do not for how to get tax forms, instructions, of your stock is generally figured at the
have to complete Form 8582. Enter the and publications. Do not attach Sched- end of the corporation's tax year. Any
(loss) from line 21 on line 22. ules K-1 to your return. Keep them for losses and deductions not allowed this
If you have an unallowed rental real your records. year because of the basis limit can be
estate loss from a prior year that after If you are treating items on your tax carried forward indefinitely and deduc-
completing Form 8582 you can include return differently from the way the part- ted in a later year subject to the basis
this year, include that loss on line 22. nership or S corporation reported them limit for that year. To figure your aggre-
on its return, you may have to file Form gated stock basis, you can generally use
8082. the Form 7203. For more details on the
basis rules for S corporations, see the In-
Parts II and III Special Rules That Limit Losses
structions for Form 7203.
If you need more space in Part II or III If you are claiming a deduction for
If you report a loss from a partnership or your share of an aggregate loss (or you
to list your income or losses, attach a S corporation, your loss may be reduced
continuation sheet using the same for- receive a distribution, dispose of stock,
or not allowed this year. Apply the basis or receive a loan repayment from an S
mat as shown in Part II or III. However, rules, at-risk rules, and passive activity
be sure to complete the “Totals” col- corporation), check the box on the ap-
loss rules to your loss on Schedule E. propriate line in Part II, column (e), and
umns for lines 29a and 29b, or lines 34a
and 34b, as appropriate. If you also If your loss is also subject to the ex- attach Form 7203 to your return.
completed Part I on more than one cess business loss rules, you figure that If you had a loss from an S corpora-
Schedule E, use the same Schedule E on limitation separately on Form 461. Any tion that was not allowed last year be-
which you entered the combined totals reduction to your loss due to the excess cause of the basis rules, but all or part is
in Part I. business loss rules will not be reflected allowed this year, see Line 27, later, for
on your Schedule E. See the Instructions how to report it.
Tax preference items. If you are a for Form 461 for more information.
partner, a shareholder in an S corpora- After applying the basis rules, the
tion, or a beneficiary of an estate or Basis rules for partnerships. General- loss you report on Schedule E may be
trust, you must take into account your ly, you may not claim your share of a further reduced by the at-risk rules and
share of preferences and adjustments partnership loss (including a capital passive activity loss rules.
from these entities for the alternative loss) to the extent that it is greater than
the adjusted basis of your partnership in- At-risk rules. If you have (a) a loss or
minimum tax on Form 6251 or Sched- other deduction from any activity car-
ule I (Form 1041). terest at the end of the partnership's tax
year. Any losses and deductions not al- ried on as a trade or business or for the
lowed this year because of the basis lim- production of income by the partnership
or S corporation, and (b) amounts in the
Part II
it can be carried forward indefinitely and
deducted in a later year subject to the activity for which you are not at risk,
basis limit for that year. To figure the your loss may be limited. For more in-
Income or Loss From basis of your interest in a partnership, formation, see At-Risk Rules, earlier.
Partnerships and S you can use the Worksheet for Adjusting If you are subject to the at-risk rules
Corporations the Basis of a Partner's Interest in the for any activity, check the box on the
Partnership in the Partner's Instructions appropriate line in Part II, column (f), of
If you are a member of a partnership or Schedule E, and use Form 6198 to figure
for Schedule K-1 (Form 1065). For
joint venture or a shareholder in an S the amount of any deductible loss. If the
more details on the basis rules for part-
corporation, use Part II to report your activity is nonpassive, enter any deducti-
nerships, see Pub. 541.
share of the partnership or S corporation ble loss from Form 6198 on the appro-
income (even if not received) or loss. If you had a loss from a partnership
that was not allowed last year because of priate line in Part II, column (i), of
If you elected to be taxed as a the basis rules, but all or part is allowed Schedule E.
! qualified joint venture instead
CAUTION of a partnership, follow the re-
this year, see Line 27, later, for how to If you had a loss from the partnership
report it. or S corporation that was not allowed
porting rules under Qualified Joint Ven- last year because of the at-risk rules, but
ture, earlier. After applying the basis rules, the
loss you report on Schedule E may be all or part is allowed this year, see
further reduced by the at-risk rules and Line 27, later, for how to report it.
You should receive a Schedule K-1
from the partnership or S corporation. passive activity loss rules. After applying the at-risk rules, the
You should also receive a copy of the Basis rules for S corporations. Gener- loss you report on Schedule E may be
Partner's or Shareholder's Instructions ally, the deduction for your share of ag- further reduced by the passive activity
for Schedule K-1. Your copy of Sched- gregate losses and deductions reported loss rules.
ule K-1 and its instructions will tell you on Schedule K-1 (Form 1120-S) is limi- Passive activity loss rules. For more
where on your return to report your ted to the basis of your stock (deter- information about passive activity los-
share of the items. If you did not receive mined with regard to distributions re- ses, see Passive Activity Loss Rules, ear-
these instructions with your Sched- ceived during the tax year) and loans lier.

E-9
 If you have a passive activity loss, in expense is allocated. See Line 28, later, business in the United States, report on
most cases you need to complete Form for more information about reporting Schedule NEC (Form 1040-NR) only
8582 to figure the amount of the loss to these interest expenses. the income shown on Form 1042-S (if
enter in Part II, column (g), for that ac- If you claimed a credit for federal tax you are required to file Form 1040-NR).
tivity. But if you are a general partner or on gasoline or other fuels on your 2020 Requirement to file Form 8865. If you
an S corporation shareholder reporting Form 1040, 1040-SR, or 1040-NR based are a U.S. person, you may have to file
your share of a partnership or an S cor- on information received from the part- Form 8865 if any of the following ap-
poration loss from a rental real estate ac- nership, enter as income in column (h) plies.
tivity and you meet all of the conditions or column (k), whichever applies, the 1. You controlled a foreign partner-
listed earlier under Exception for Cer- amount of the credit claimed for 2020. ship (that is, you owned more than a
tain Rental Real Estate Activities, you
Part or all of your share of partner- 50% direct or indirect interest in the
do not have to complete Form 8582. In-
ship income or loss from the operation partnership).
stead, enter your (loss) in Part II, col-
of the business may be considered net 2. You owned at least a 10% direct
umn (g).
earnings from self-employment that or indirect interest in a foreign partner-
If you have passive activity income, must be reported on Schedule SE. Enter ship while U.S. persons controlled that
complete Part II, column (h), for that ac- the amount from Schedule K-1 (Form partnership.
tivity. If you have nonpassive income or 1065), box 14, code A, on Schedule SE
losses, complete Part II, columns (i) 3. You had an acquisition, disposi-
after you reduce this amount by any al-
through (k), as appropriate. tion, or change in proportional interest
lowable expenses attributable to that in-
of a foreign partnership that:
If you had a loss from the partnership come.
or S corporation that was not allowed a. Increased your direct interest to at
last year because of the passive activity Foreign Partnerships least 10% or reduced your direct interest
loss rules, but all or part is allowed this of at least 10% to less than 10%, or
Follow the instructions below in addi-
year, see Line 27, later, for how to report b. Changed your direct interest by at
tion to the instructions earlier for Do-
it. least a 10% interest.
mestic Partnerships.
Excess business loss rules. If you re- 4. You contributed property to a for-
If you are a U.S. person, you may
port a loss on Schedule E from a part- eign partnership in exchange for a part-
have received Forms 1099-B,
nership or S corporation engaged in a nership interest if:
1099-DIV, and 1099-INT reporting your
trade or business, use Form 461 to figure a. Immediately after the contribu-
share of certain partnership income, be-
your excess business loss. Your excess tion, you owned, directly or indirectly,
cause payors of income to the foreign
business loss will not be reflected on at least a 10% interest in the partnership;
partnership in most cases are required to
your Schedule E; instead, it will be add- or
allocate and report payments of that in-
ed to your income on Form 1040 and
come directly to each of the partners of b. The value of the property you
carried forward to a subsequent year as a
the foreign partnership. If you received contributed, when added to the value of
net operating loss. For more informa-
both Schedule K-1 and Form 1099 for any other property you or any related
tion, see the Instructions for Form 461.
the same type and source of partnership person contributed to the partnership
income, report only the income shown during the 12-month period ending on
Domestic Partnerships on Schedule K-1 in accordance with its the date of transfer, exceeds $100,000.
See the Schedule K-1 instructions before instructions.
entering on your return other partnership Also, you may have to file Form
If you are not a U.S. person, you may 8865 if you contributed property with
items from a passive activity or income have received Forms 1042-S reporting
or loss from any publicly traded partner- built-in gain to a foreign partnership (or
your share of certain partnership in- certain domestic partnerships) or to re-
ship. come, because payors of income to the port certain dispositions by a foreign
You can deduct unreimbursed ordina- foreign partnership in most cases are re- partnership of property you previously
ry and necessary expenses you paid on quired to allocate and report payments contributed to that partnership if you
behalf of the partnership if you were re- of that income directly to each of the were a partner at the time of the disposi-
quired to pay these expenses under the partners of the foreign partnership. If tion.
partnership agreement. See Line 27, lat- you received both Schedule K-1 and
er, for how to report these expenses. Form 1042-S for the same type and For more details, including penalties
source of partnership income, report the for failing to file Form 8865, see Form
If you used loan proceeds to buy an 8865 and its separate instructions.
interest in, or make a contribution to the income on your return as follows.
capital of, a partnership (debt-financed • For all income effectively connec- S Corporations
acquisition), report your share of deduc- ted with the conduct of a trade or busi-
tible partnership interest expense on ei- ness in the United States, report only the Distributions of prior year accumulated
ther Schedule A or Schedule E, depend- income shown on Schedule K-1 in ac- earnings and profits of S corporations
ing on the type of asset (or expenditure cordance with its instructions. are dividends and are reported on Form
if the allocation is based on the tracing • For all income not effectively con- 1040 or 1040-SR, line 3b.
of loan proceeds) to which the interest nected with the conduct of a trade or

E-10
 If you used loan proceeds to buy an Unreimbursed Partnership ted interest expense among all the assets
interest in, or make a contribution to the Expenses of the entity. You can use any reasona-
capital of, an S corporation (debt-fi- ble method.
You can deduct unreimbursed ordinary
nanced acquisition), report your share of For interest allocated to trade or busi-
and necessary partnership expenses you
deductible S corporation interest ex- ness assets (or expenditures), report the
paid on behalf of the partnership on
pense on either Schedule A or Sched- interest on a separate line of your Sched-
Schedule E if you were required to pay
ule E, depending on the type of asset (or ule E, Part II. Enter "business interest"
these expenses under the partnership
expenditure if the allocation is based on and the name of the partnership or S cor-
agreement. You can only deduct unreim-
the tracing of loan proceeds) to which poration in column (a) and the amount
bursed expenses on Schedule E that are
the interest expense is allocated. See in column (i).
trade or business expenses under section
Line 28, later, for more information
162. Don't report unreimbursed partner- For interest allocated to passive activ-
about reporting these interest expenses.
ship expenses separately if the expenses ity use, enter the interest on Form 8582
Your share of the net income of an S are from a passive activity and you are as a deduction from the passive activity
corporation is not subject to self-em- required to file Form 8582; otherwise, of the partnership or S corporation.
ployment tax. do the following. Show any deductible amount on a sepa-
• Enter unreimbursed partnership rate line on your Schedule E, Part II. En-
Line 27 expenses from nonpassive activities on a ter "passive interest" and the name of the
If you answered “Yes” on line 27, fol- separate line in column (i) of line 28. Do entity in column (a) and the amount in
low the instructions below. If you do not not combine these expenses with, or net column (g).
follow these instructions, the IRS may them against, any other amounts from For interest allocated to investment
send you a notice of additional tax due the partnership. use, enter the interest on Form 4952.
because the amounts reported by the • If the expenses are from a passive Carry any deductible amount allocated
partnership or S corporation on Sched- activity and you are not required to file to royalties to a separate line of your
ule K-1 do not match the amounts you Form 8582, enter the expenses related to Schedule E, Part II. Enter "investment
reported on your tax return. a passive activity on a separate line in interest" and the name of the entity in
column (g) of line 28. Do not combine column (a) and the amount in column
Losses Not Allowed in Prior Years these expenses with, or net them against, (i). Carry the balance of the deductible
Due to the Basis or At-Risk Rules any other amounts from the partnership. amount to Schedule A, line 9.
• Enter “UPE” in column (a) of the
• Enter your total prior year unal- same line.
Any interest allocated to proceeds
lowed losses that are now deductible on used for personal purposes is generally
not deductible.
a separate line in column (i) of line 28. Line 28
Do not combine these losses with, or net For more information on allocating
them against, any current year amounts For nonpassive income or loss and pas- and reporting these interest expenses,
from the partnership or S corporation. sive income or losses for which you are see Notice 88-37 in Cumulative Bulletin
• Enter “PYA” in column (a) of the not filing Form 8582, enter in the appli- 1988-1. Also, see Notice 89-35 in Cu-
same line. cable column of line 28 your current mulative Bulletin 1989-1.
year ordinary income or loss (after ap-
plying any special rules that limit losses) Owners of S corporation stock and
Prior Year Unallowed Losses debt. If you report a loss, receive a dis-
from the partnership or S corporation.
From a Passive Activity Not tribution, dispose of stock, or receive a
Report each related item required to be
Reported on Form 8582 reported on Schedule E (including items loan repayment from an S corporation,
you must check the box in column (e) on
• Enter on a separate line in column of income or loss stated separately on
line 28 and attach the required basis
(g) of line 28 your total prior year unal- Schedule K-1) in the applicable column
lowed losses not reported on Form 8582. of a separate line following the line on computation. For more information, see
Such losses include prior year unal- which you reported the current year or- Basis rules for S corporations, earlier.
lowed losses now deductible because dinary income or loss. Also, enter a de-
you did not have an overall loss from all scription of the related item (for exam-
passive activities or you disposed of ple, depletion) in column (a) of the same Part III
your entire interest in a passive activity line.
in a fully taxable transaction. Do not Income or Loss From
combine these losses with, or net them If you are required to file Form 8582, Estates and Trusts
against, any current year amounts from see the Instructions for Form 8582 be-
fore completing Schedule E. If you are a beneficiary of an estate or
the partnership or S corporation.
trust, use Part III to report your part of
• Enter “PYA” in column (a) of the Debt-financed acquisition. A debt-fi-
the income (even if not received) or loss.
same line. nanced acquisition is the use of loan
You should receive a Schedule K-1
proceeds to buy an interest in, or to
(Form 1041) from the fiduciary. Your
make a contribution to the capital of, a
copy of Schedule K-1 and its instruc-
partnership or S corporation. You must
tions will tell you where on your return
allocate the loan proceeds and the rela-

E-11
to report the items from Schedule K-1. totals of columns (d) and (e) on Sched- come. You will not be charged a penalty
Do not attach Schedule K-1 to your re- ule E, line 39. If you also completed Part for underpayment of estimated tax if:
turn. Keep it for your records. I on more than one Schedule E, use the 1. Your gross farming or fishing in-
If you are treating items on your tax same Schedule E on which you entered come for 2020 or 2021 is at least
return differently from the way the es- the combined totals in Part I. two-thirds of your gross income; and
tate or trust reported them on its return, REMIC income or loss is not income 2. You file your 2021 tax return and
you may have to file Form 8082. or loss from a passive activity. pay the tax due by March 1, 2022.
If you have estimated taxes credited For details, see chapter 15 of Pub. 225.
to you from a trust (Form 1041, Sched- Note. If you are the holder of a regular
ule K-1, box 13, code A), enter “ES pay- interest in a REMIC, do not use Sched- Paperwork Reduction Act Notice. We
ment claimed” and the amount on the ule E to report the income you received. ask for the information on this form to
dotted line next to line 37. Do not in- Instead, report it on Form 1040 or carry out the Internal Revenue laws of
clude this amount in the total on line 37. 1040-SR, line 2b. the United States. You are required to
Instead, enter the amount on Form 1040, Column (c). Report the total of the give us the information. We need it to
1040-SR, or 1040-NR, line 26. amounts shown on Schedule(s) Q, ensure that you are complying with
line 2c. This is the smallest amount you these laws and to allow us to figure and
A U.S. person who transferred prop-
are allowed to report as your taxable in- collect the right amount of tax.
erty to a foreign trust may have to report
come (Form 1040, 1040-SR, or You are not required to provide the
the income received by the trust as a re-
1040-NR, line 15). It is also the smallest information requested on a form that is
sult of the transferred property if, during
amount you are allowed to report as subject to the Paperwork Reduction Act
2021, the trust had a U.S. beneficiary.
your alternative minimum taxable in- unless the form displays a valid OMB
See section 679. An individual who re-
come (AMTI) on Form 6251, line 4. control number. Books or records relat-
ceived a distribution from, or who was
the grantor of or transferor to, a foreign If the amount in column (c) is larger ing to a form or its instructions must be
trust must also complete Part III of than your taxable income would other- retained as long as their contents may
Schedule B (Form 1040) and may have wise be, enter the amount from column become material in the administration of
to file Form 3520. In addition, the owner (c) on Form 1040, 1040-SR, or any Internal Revenue law. Generally,
of a foreign trust must ensure that the 1040-NR, line 15. Similarly, if the tax returns and return information are
trust files an annual information return amount in column (c) is larger than your confidential, as required by section
on Form 3520-A. AMTI would otherwise be, enter the 6103.
amount from column (c) on Form 6251, The time needed to complete and file
line 4. Enter “Sch Q” on the dotted line this form will vary depending on indi-
Part IV to the left of this amount on Form 1040,
1040-SR, or 1040-NR, line 15; and
vidual circumstances. The estimated
burden for individual taxpayers filing
Form 6251, line 4, if applicable.
Income or Loss From Real this form is included in the estimates
shown in the instructions for their indi-
Estate Mortgage Investment Note. These rules also apply to estates
vidual income tax return. The estimated
Conduits (REMICs) and trusts that hold a residual interest in
burden for all other taxpayers who file
a REMIC. Be sure to make the appropri-
If you are the holder of a residual inter- this form is approved under OMB con-
ate entries on the comparable lines on
est in a REMIC, use Part IV to report trol number 1545-1972 and is shown
Form 1041.
your total share of the REMIC's taxable next.
income or loss for each quarter included Do not include the amount
in your tax year. You should receive ! shown in column (c) in the total
on Schedule E, line 39.
Recordkeeping . . . . . . . . . 3 hr., 3 min.
Schedule Q (Form 1066) and instruc- CAUTION Learning about the law or the
tions from the REMIC for each quarter. form . . . . . . . . . . . . . . . 1 hr., 2 min.
Column (e). Report the total of the Preparing the form . . . . . . 1 hr., 34 min.
Do not attach Schedule(s) Q to your re-
amounts shown on Schedule(s) Q, Copying, assembling, and
turn. Keep them for your records.
line 3b. sending the form to the IRS . 34 min.
If you are treating REMIC items on
your tax return differently from the way
the REMIC reported them on its return,
you may have to file Form 8082. Part V Summary If you have comments concerning the
accuracy of these time estimates or sug-
If you are the holder of a residual in- Line 42 gestions for making this form simpler,
terest in more than one REMIC, attach a we would be happy to hear from you.
Special estimated tax rules may apply if
continuation sheet using the same for- See the instructions for the tax return
you have gross farming or fishing in-
mat as in Part IV. Enter the combined with which this form is filed.

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