Schedule E 2026 — Complete Guide for Rental Property Owners

What Is Schedule E in 2026?

Schedule E (Form 1040) — Supplemental Income and Loss — is used to report income or loss from:

• Rental real estate
• Royalties
• Partnerships
• S corporations
• Trusts and estates

For landlords, Part I of Schedule E is where all rental activity is reported. You file it as an attachment to your Form 1040 personal tax return. The net rental income or loss from Schedule E flows directly to your Form 1040 and affects your total taxable income.

Who Must File Schedule E in 2026?

You must file Schedule E if during the 2026 tax year you:

• Received any rental income from real property
• Had any deductible rental expenses — even if the property had no income
• Rented out a vacation home or short-term rental (Airbnb, VRBO)
• Rented out a room in your primary residence
• Had a rental property that operated at a loss

Even if your rental activity resulted in a loss, you are still required to file Schedule E to report it.

Schedule E 2026 — Key Sections Explained

Part I — Income and Loss from Rental Real Estate

This is the primary section for landlords. You report each property separately, including:

• Line A: Property address
• Line B: Type of property (single family, multi-family, vacation, commercial, etc.)
• Line 1: Total rents received during the year
• Lines 5–18: Deductible expenses by category
• Line 19: Depreciation expense
• Line 20: Total expenses
• Line 21: Net income or loss before passive activity limits
• Line 22: Deductible rental loss after applying passive activity rules

Part II — Income or Loss from Partnerships and S Corporations

This section is for landlords who hold rental properties through partnerships or S corporations. You report your share of income or loss from Schedule K-1.

Schedule E Expense Categories for 2026

The following expenses are deductible on Schedule E for the 2026 tax year:

• Advertising — listing fees, signage, photography for rental listings
• Auto and travel — mileage to and from your rental property for business purposes
• Cleaning and maintenance — routine upkeep, landscaping, pest control, pool maintenance
• Commissions — leasing agent or broker fees to find tenants
• Insurance — landlord, fire, flood, liability insurance premiums
• Legal and professional fees — attorney fees for leases and evictions, CPA fees for rental tax prep
• Management fees — property management company fees
• Mortgage interest — interest shown on Form 1098 from your lender
• Other interest — interest on loans specifically for the rental property
• Repairs — fixing items to restore original condition (not improvements)
• Supplies — materials used for the rental property
• Taxes — real estate property taxes paid
• Utilities — if paid by the landlord on behalf of tenants
• Depreciation — annual depreciation of the building over 27.5 years

For a full breakdown of every category, see our guide on rental expense categories for Schedule E.

Depreciation in 2026 — Don't Skip This

Depreciation is often the largest single deduction available to landlords on Schedule E, yet many skip it because it seems complicated. This is a costly mistake.

For residential rental property in 2026:

• Depreciation period: 27.5 years
• Method: Straight-line
• Only the building is depreciated — not the land

Example: If you purchased a rental property for $300,000 and the land is valued at $50,000, the depreciable basis is $250,000. Your annual depreciation deduction is $250,000 ÷ 27.5 = $9,090 per year.

Over 10 years that is $90,900 in tax deductions — even if you never spend a dollar on the property. The IRS requires you to recapture depreciation when you sell the property, whether you claimed it or not. Always claim your full depreciation deduction.

Passive Activity Loss Rules in 2026

If your rental expenses exceed your rental income, you have a rental loss. The IRS passive activity rules determine whether you can deduct that loss:

• AGI $100,000 or less: You may deduct up to $25,000 of rental losses against ordinary income if you actively participate in managing the property.
• AGI between $100,000 and $150,000: The $25,000 allowance phases out at 50 cents per dollar of AGI above $100,000.
• AGI over $150,000: Rental losses generally can only offset passive income — not wages or business income. Unused losses carry forward to future years.
• Real Estate Professional Exception: If you qualify as a real estate professional (750+ hours per year in real estate activities, more than half your working time), rental losses are not subject to passive activity limits.

Common Schedule E Mistakes in 2026

• Not claiming depreciation — the most expensive mistake landlords make
• Deducting capital improvements as repairs — improvements must be depreciated, not immediately deducted. See our guide on repairs vs. improvements
• Missing the mortgage interest deduction — only the interest on Form 1098, not principal
• Not tracking mileage — every business trip to your rental property is deductible
• Mixing personal and rental expenses — if you use the property personally, expenses must be allocated
• Not reporting all rental income — security deposits kept, services received instead of rent, and advance rent are all taxable

Frequently Asked Questions