What Is Schedule E-1 and Who Is Required to File It?

Schedule E-1 is not a term used by the IRS. The search results refer to Schedule E (Form 1040), which is used to report supplemental income and loss. A taxpayer-created attachment used for additional properties is sometimes informally called a “Schedule E-1.”

Who Must File Additional Schedule E Forms

Taxpayers who receive income from more than three rental real estate or royalty properties must use additional Schedule E forms. The primary Schedule E form only provides space to detail the income and expenses for up to three properties. Therefore, the fourth property and any subsequent ones must be reported on a separate Schedule E.

For instance, a single-family home rented to a tenant is considered one property. A duplex, which is a single building with two separate rental units, is also treated as one property for reporting purposes on Schedule E. If an individual owns two separate condominium units, even if they are in the same building, they are considered two distinct properties.

The process involves listing the first three properties directly on Part I of one Schedule E. All information for the fourth and any additional properties is then detailed on a new Schedule E form.

Required Information and Documentation

Before completing Schedule E for multiple properties, a thorough gathering of documents is necessary for accurate reporting. For each property, specific identification and financial records must be compiled.

First, you must clearly identify each property by recording its full physical address and the type of property, such as a single-family residence or commercial unit. This information is entered at the top of the columns provided in Part I of the schedule.

Next, collect all income records for the tax year for each property. This includes the record of gross rents received from tenants. For royalty income, this would include any Forms 1099-MISC. It is important to have a clear total of all income generated by each property.

A collection of expense documentation is also required, including all receipts, invoices, and statements for property maintenance costs. Documents include Form 1098, Mortgage Interest Statement, records of property taxes paid, and statements for hazard insurance premiums. You will also need receipts for repairs, bills for utilities paid by the owner, and records of fees for property management or professional services.

Finally, assemble the data needed to calculate depreciation. This includes the property’s cost basis, which is the amount you paid plus certain settlement fees. You will also need the date the property was “placed in service,” meaning the date it was ready and available to be rented, and records of any depreciation claimed in prior tax years.

Completing Multiple Schedule E Forms

With the necessary documentation gathered, the process involves transcribing the financial data into the appropriate sections on your Schedule E forms. The form is structured to guide you through reporting income, itemizing expenses, and summarizing the financial performance of your properties.

First, report the income for each property in the “Income” section. You will enter the total gross rents received during the tax year on line 3 and any royalty income on line 4. These figures should be taken directly from your compiled income records.

Next, detail the expenses for each property in the “Expenses” section, which spans lines 5 through 20. Each line corresponds to a specific category of rental expense. You will input the total amounts for items like advertising, auto and travel, insurance, and mortgage interest on their designated lines. Other lines accommodate costs for repairs, property taxes, utilities, and management fees.

Another expense to report is depreciation. The amount of depreciation you can claim for each property is calculated separately, often using Form 4562, Depreciation and Amortization, and the result is entered on line 18. After filling in all applicable expense lines, you will calculate the total expenses for each property and enter the result on line 20.

Finally, you will calculate the net income or loss for each individual property by subtracting the total expenses on line 20 from the total income. This net figure is entered on line 21 for each property.

Filing and Integrating with Schedule E

Once all necessary Schedule E forms are completed, the final step is to consolidate the financial totals from all properties onto a single “master” Schedule E. This ensures the income and losses from all your properties are correctly reported on your tax return.

You will only fill out the summary on lines 23a through 26 on one of these forms, which becomes the master Schedule E. This form will show the combined totals from all properties you reported across all attached Schedule E forms. For example, line 23a on the master form should include the total gross rents from all properties, and line 26 will show the final consolidated figure that flows to your Form 1040.

When filing a paper return, the additional Schedule E forms must be physically attached behind the master Schedule E. For those who file electronically, tax software handles this process automatically. The software generates the necessary supplemental forms and consolidates the totals for submission to the IRS.