2022 Instructions for Schedule E - Supplemental Income and Loss

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Department of the Treasury

Internal Revenue Service

2022 Instructions for Schedule E

Supplemental

Income and Loss

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.

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

Revenue Code unless otherwise noted.

Future Developments

For the latest information about devel-

opments related to Schedule E (Form

1040) and its instructions, such as legis-

lation enacted after they were published,

go to

IRS.gov/ScheduleE.

What's New

Standard mileage rate. The standard

mileage rate for miles driven in connec-

tion with your rental activities from Jan-

uary 1, 2022, to June 30, 2022, is 58.5

cents a mile. The standard mileage rate

for miles driven in connection with your

rental activities from July 1, 2022, to

December 31, 2022, is 62.5 cents a mile.

New Form 7205, Energy Efficient

Commercial Buildings Deduction.

This new form and its separate instruc-

tions are used to claim the IRC 179D de-

duction for qualifying energy efficient

commercial building expenses.

Reminders

Self-employed tax payments deferred

from 2020. If you elected to defer

self-employed tax payments from 2020,

see How self-employed individuals and

household employers repay deferred

Social Security tax.

Business meal expense. For a limited

time, business meals are 100% deducti-

ble under certain conditions. See Line 6,

later, for more information.

Excess business loss limitation. If you

report a loss on line 26, 32, 37, or 39 of

your Schedule E (Form 1040), you may

be subject to a business loss limitation.

The disallowed loss resulting from the

limitation will not be reflected on

line 26, 32, 37, or 39 of your Sched-

ule E. Instead, use Form 461 to deter-

mine the amount of your excess business

loss, which will be included as income

on Schedule 1 (Form 1040), line 8p.

Any disallowed loss resulting from this

limitation will be treated as a net operat-

ing loss that must be carried forward and

deducted in a subsequent year.

See Form 461 and its instructions for

details on the excess business loss limi-

tation.

Figuring a shareholder’s stock and

debt basis. See Form 7203 and its sepa-

rate instructions, which have been devel-

oped to replace the 3-part Worksheet for

Figuring a Shareholder’s Stock and Debt

Basis and its related instructions former-

ly found in the Shareholder’s Instruc-

tions for Schedule K-1 (Form 1120-S).

General

Instructions

Other Schedules and Forms

You May Have To File

•

Schedule A (Form 1040) to deduct

interest, taxes, and casualty losses not

related to your business.

•

Form 461 to report an excess

business loss.

•

Form 941 to report the employer

share and employee share of social

security tax and Medicare tax, withheld

federal income tax, and, if applicable,

withheld Additional Medicare Tax.

•

Form 944 for smallest employers

(those whose annual liability for social

security, Medicare, and withheld federal

income taxes is $1,000 or less) to file

and pay these taxes only once a year

instead of every quarter.

•

Form 1041 to report information

for estates and trusts.

•

Form 3520 to report certain

transactions with foreign trusts and

receipt of certain large gifts or bequests

from certain foreign persons.

•

Form 4562 to claim depreciation

and amortization (including information

on listed property) on assets placed in

service in 2022, to claim amortization

that began in 2022, to make an election

under section 179 to expense certain

property, or to report information on

listed property.

•

Form 4684 to report a casualty or

theft gain or loss involving property

used in your trade or business or

income-producing property.

•

Form 4797 to report sales,

exchanges, and involuntary conversions

(not from a casualty or theft) of trade or

business property.

•

Form 6198 to apply a limitation to

your loss from an at-risk activity.

•

Form 7203 to figure potential

limitations of your share of the S

corporation's deductions, credits, and

other items that can be deducted on your

return.

•

Form 7205 to claim the deduction

for qualifying energy efficient

commercial building expense(s).

•

Form 8082 to notify the IRS of any

inconsistent tax treatment for an item on

your return.

•

Form 8582 to apply a limitation to

your loss from passive activities.

•

Form 8824 to report like-kind

exchanges.

•

Form 8826 to claim a credit for

expenditures to improve access to your

business for individuals with disabilities.

•

Form 8873 to figure your

extraterritorial income exclusion.

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•

Form 8910 to claim a credit for

placing a new alternative motor vehicle

in service for business use.

•

Form 8960 to pay Net Investment

Income Tax on certain income from

your rental and other passive activities.

•

Form 8990 to determine whether

your business interest deduction is

limited.

•

Form 8995 or 8995-A to claim a

deduction for qualified business income.

Single-member limited liability com-

pany (LLC). In most cases, a sin-

gle-member domestic LLC is not treated

as a separate entity for federal income

tax purposes. If you are the sole member

of a domestic LLC, file Schedule E (or

Schedule C or F, if applicable). Howev-

er, you can elect to treat a domestic LLC

as a corporation. See Form 8832 for de-

tails on the election and the tax treat-

ment of a foreign LLC.

Information returns. You may have to

file information returns for wages paid

to employees, certain payments of fees

and other nonemployee compensation,

interest, rents, royalties, real estate trans-

actions, annuities, and pensions. For de-

tails, see Line A, later, and the 2022

General Instructions for Certain Infor-

mation Returns.

If you received cash of more than

$10,000 in one or more related transac-

tions in your trade or business, you may

have to file Form 8300. For details, see

Pub. 1544.

Qualified Joint Venture

If you and your spouse each materially

participate (see Material participation in

the Instructions for Schedule C) as the

only members of a jointly owned and

operated rental real estate business and

you file a joint return for the tax year,

you can elect to be treated as a qualified

joint venture instead of a partnership.

This election, in most cases, will not in-

crease the total tax owed on the joint re-

turn. By making the election, you will

not be required to file Form 1065 for

any year the election is in effect and will

instead report the income and deduc-

tions directly on your joint return. If you

and your spouse filed Form 1065 for the

year prior to the election, the partnership

terminates at the end of the tax year im-

mediately preceding the year the elec-

tion takes effect.

Note. Mere joint ownership of property

that is not a trade or business does not

qualify for the election.

Only businesses that are owned

and operated by spouses as

co-owners (and not in the name

of a state law entity) qualify for the elec-

tion. Thus, a business owned and oper-

ated by spouses through an LLC does

not qualify for the election of a qualified

joint venture.

Making the election. To make this

election for your rental real estate busi-

ness, check the “QJV” box on line 2 for

each property that is part of the qualified

joint venture. You must divide all items

of income, gain, loss, deduction, and

credit attributable to the rental real estate

business between you and your spouse

in accordance with your respective inter-

ests in the venture. Although you and

your spouse will not each file your own

Schedule E as part of the qualified joint

venture, each of you must report your

interest as separate properties on line 1

of Schedule E. On lines 3 through 22 for

each separate property interest, you must

enter your share of the applicable in-

come, deduction, or loss.

If you have more than three rental re-

al estate or royalty properties, complete

and attach as many Schedules E as you

need to list them. But fill in lines 23a

through 26 on only one Schedule E. The

figures on lines 23a through 26 on that

Schedule E should be the combined to-

tals for all properties reported on your

Schedules E.

Once made, the election can be re-

voked only with the permission of the

IRS. However, the election technically

remains in effect only for as long as the

spouses filing as a qualified joint ven-

ture continue to meet the requirements

to be treated as a qualified joint venture.

If the spouses fail to meet the qualified

joint venture requirements for a year, a

new election will be necessary for any

future year in which the spouses meet

the requirements to be treated as a quali-

fied joint venture.

Rental real estate income is generally

not included in net earnings from

self-employment subject to self-employ-

ment tax and is generally subject to pas-

sive loss limitation rules. Electing quali-

fied joint venture status does not alter

CAUTION

the application of the self-employment

tax or the passive loss limitation rules.

For more information on qualified

joint ventures, go to IRS.gov/QJV.

Reportable Transaction

Disclosure Statement

Use Form 8886 to disclose information

for each reportable transaction in which

you participated. Form 8886 must be

filed for each tax year that your federal

income tax liability is affected by your

participation in the transaction. You may

have to pay a penalty if you are required

to file Form 8886 but do not do so. You

may also have to pay interest and penal-

ties on any reportable transaction under-

statements. The following are reportable

transactions.

•

Any listed transaction that is the

same as or substantially similar to tax

avoidance transactions identified by the

IRS.

•

Any transaction offered to you or a

related party under conditions of confi-

dentiality for which you paid an advisor

a fee of at least $50,000.

•

Certain transactions for which you

or a related party have contractual pro-

tection against disallowance of the tax

benefits.

•

Certain transactions resulting in a

loss of at least $2 million in any single

tax year or $4 million in any combina-

tion of tax years (at least $50,000 for a

single tax year if the loss arose from a

foreign currency transaction defined in

section 988(c)(1), whether or not the

loss flows through from an S corpora-

tion or partnership).

•

Certain transactions of interest en-

tered into that are the same as or sub-

stantially similar to transactions that the

IRS has identified by notice, regulation,

or other form of published guidance as

transactions of interest.

See the Instructions for Form 8886

for more details.

Limitation on Losses

If you report a loss from rental real es-

tate or royalties in Part I, a loss from a

partnership or S corporation in Part II, or

a loss from an estate or trust in Part III,

your loss may be reduced or not allowed

this year. You must apply the following

rules to your loss.

•

Basis rules apply to losses from a

partnership or S corporation. See Basis

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rules for partnerships and Basis rules

for S corporations, later, in Part II.

•

At-risk rules apply to losses from

rental real estate or royalties. They also

apply to losses from a partnership, S

corporation, estate, or trust. See At-Risk

Rules, later, in the General Instructions.

If the loss is from a partnership or S

corporation, also see At-risk rules, later,

in Part II.

•

Passive activity loss rules apply to

losses from rental real estate. They also

apply to losses from a partnership, S

corporation, estate, or trust. See Passive

Activity Loss Rules, later, in the General

Instructions. If the loss is from a

partnership or S corporation, also see

Passive activity loss rules, later, in Part

II.

•

Excess business loss rules apply to

losses from all noncorporate trades or

businesses. This loss limitation is

figured using Form 461 after you

complete your Schedule E. Any

limitation to your loss resulting from

these rules will not be reflected on your

Schedule E. Instead, it will be included

as income on Schedule 1 (Form 1040),

line 8p, and treated as a net operating

loss that must be carried forward and

deducted in a subsequent year. These

rules also apply to losses from a

partnership or S corporation.

At-Risk Rules

In most cases, you must complete Form

6198 to figure your loss if you have:

•

A loss from an activity carried on

as a trade or business or for the produc-

tion of income, and

•

Amounts in the activity for which

you are not at risk.

The at-risk rules in most cases limit

the amount of loss (including loss on the

disposition of assets) you can claim to

the amount you could actually lose in

the activity. However, the at-risk rules

do not apply to losses from an activity of

holding real property placed in service

before 1987. They also do not apply to

losses from your interest acquired before

1987 in a pass-through entity engaged in

such activity. The activity of holding

mineral property does not qualify for

this exception.

In most cases, you are not at risk for

amounts such as the following.

•

Nonrecourse loans used to finance

the activity, to acquire property used in

the activity, or to acquire your interest in

the activity that are not secured by your

own property (other than property used

in the activity). However, there is an ex-

ception for certain nonrecourse financ-

ing borrowed by you in connection with

the activity of holding real property

(other than mineral property). See

Qualified nonrecourse financing, later.

•

Cash, property, or borrowed

amounts used in the activity (or contrib-

uted to the activity, or used to acquire

your interest in the activity) that are pro-

tected against loss by a guarantee,

stop-loss agreement, or other similar ar-

rangement (excluding casualty insurance

and insurance against tort liability).

•

Amounts borrowed for use in the

activity from a person who has an inter-

est in the activity (other than as a cred-

itor) or who is related under section

465(b)(3)(C) to a person (other than

you) having such an interest.

Qualified nonrecourse financing.

Qualified nonrecourse financing is trea-

ted as an amount at risk if it is secured

by real property used in an activity of

holding real property subject to the

at-risk rules. Qualified nonrecourse fi-

nancing is financing for which no one is

personally liable for repayment and is:

•

Borrowed by you in connection

with the activity of holding real property

(other than mineral property);

•

Not convertible from a debt obli-

gation to an ownership interest; and

•

Loaned or guaranteed by any fed-

eral, state, or local government, or bor-

rowed by you from a qualified person.

Qualified person. A qualified person

is a person who actively and regularly

engages in the business of lending mon-

ey, such as a bank or savings and loan

association. A qualified person cannot

be:

•

Related to you (unless the nonre-

course financing obtained is commer-

cially reasonable and on substantially

the same terms as loans involving unre-

lated persons),

•

The seller of the property (or a per-

son related to the seller), or

•

A person who receives a fee due to

your investment in real property (or a

person related to that person).

More information. For more details

about the at-risk rules, see the Instruc-

tions for Form 6198 and Pub. 925.

Passive Activity Loss Rules

The passive activity loss rules may limit

the amount of losses you can deduct.

These rules apply to losses in Parts I, II,

and III, and line 40 of Schedule E.

Losses from passive activities may be

subject first to the at-risk rules. Losses

deductible under the at-risk rules are

then subject to the passive activity loss

rules.

You can deduct losses from passive

activities in most cases only to the ex-

tent of income from passive activities.

An exception for certain rental real es-

tate activities (explained later) may ap-

ply.

Passive Activity

A passive activity is any business activi-

ty in which you did not materially par-

ticipate and any rental activity, except as

explained later. If you are a limited part-

ner, in most cases, you are not treated as

having materially participated in the

partnership's activities for the year.

The rental of real or personal proper-

ty is a rental activity under the passive

activity loss rules in most cases, but ex-

ceptions apply. If your rental of property

is not treated as a rental activity, you

must determine whether it is a trade or

business activity and, if so, whether you

materially participated in the activity for

the tax year.

See the Instructions for Form 8582 to

determine whether you materially par-

ticipated in the activity and for the defi-

nition of “rental activity.”

See Pub. 925 for special rules that ap-

ply to rentals of:

•

Substantially nondepreciable prop-

erty,

•

Property incidental to development

activities, and

•

Property related to activities in

which you materially participate.

Activities That Are Not Passive

Activities

Activities of real estate professionals.

If you were a real estate professional for

2022, any rental real estate activity in

which you materially participated is not

a passive activity. You were a real estate

professional for the year only if you met

both of the following conditions.

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•

More than half of the personal

services you performed in trades or busi-

nesses during the year were performed

in real property trades or businesses in

which you materially participated.

•

You performed more than 750

hours of services during the year in real

property trades or businesses in which

you materially participated.

If you are married filing jointly, ei-

ther you or your spouse must meet both

of the above conditions without taking

into account services performed by the

other spouse.

A real property trade or business is

any real property development, redevel-

opment, construction, reconstruction, ac-

quisition, conversion, rental, operation,

management, leasing, or brokerage trade

or business. Services you performed as

an employee are not treated as per-

formed in a real property trade or busi-

ness unless you owned more than 5% of

the stock (or more than 5% of the capital

or profits interest) in the employer.

If you qualify as a real estate profes-

sional, rental real estate activities in

which you materially participated are

not passive activities. For purposes of

determining whether you materially par-

ticipated in your rental real estate activi-

ties, each interest in rental real estate is a

separate activity unless you elect to treat

all your interests in rental real estate as

one activity. To make this election, at-

tach a statement to your original tax re-

turn that declares you are a qualifying

taxpayer for the year and you are mak-

ing the election under section 469(c)(7)

(A). The election applies for the year

made and all later years in which you

are a real estate professional. You can

revoke the election only if your facts

and circumstances materially change.

If you did not make this elec-

tion on your timely filed return,

you may be eligible to make a

late election to treat all your interest in

rental real estate as one activity. See

Rev. Proc. 2011-34, 2011-24 I.R.B. 875,

available at IRS.gov/irb/

2011-24_IRB#RP-2011-34.

If you were a real estate professional

for 2022, complete Schedule E, line 43.

Other activities. The rental of a dwell-

ing unit that you used as a home is not

subject to the passive loss limitation

TIP

rules. See Line 2, later, to see if you

used the dwelling unit as a home.

A working interest in an oil or gas

well you held directly or through an en-

tity that did not limit your liability is not

a passive activity even if you did not

materially participate.

Royalty income not derived in the or-

dinary course of a trade or business re-

ported on Schedule E in most cases is

not considered income from a passive

activity.

For more details on passive activities,

see the Instructions for Form 8582 and

Pub. 925.

Exception for Certain Rental Real

Estate Activities

If you meet all of the following condi-

tions, your rental real estate losses are

not limited by the passive activity loss

rules, and you do not need to complete

Form 8582. If you do not meet all of

these conditions, see the Instructions for

Form 8582 to find out if you must com-

plete and attach Form 8582 to figure any

losses allowed.

1. Rental real estate activities are

your only passive activities.

2. You do not have any prior year

unallowed losses from any passive ac-

tivities.

3. All of the following apply if you

have an overall net loss from these ac-

tivities.

a. You actively participated (defined

later) in all of the rental real estate activ-

ities.

b. If married filing separately, you

lived apart from your spouse all year.

c. Your overall net loss from these

activities is $25,000 or less ($12,500 or

less if married filing separately).

d. You have no current or prior year

unallowed credits from passive activi-

ties.

e. Your modified adjusted gross in-

come (defined later) is $100,000 or less

($50,000 or less if married filing sepa-

rately).

f. You do not hold any interest in a

rental real estate activity as a limited

partner or as a beneficiary of an estate or

a trust.

Active participation. You can meet the

active participation requirement without

regular, continuous, and substantial in-

volvement in real estate activities. But

you must have participated in making

management decisions or arranging for

others to provide services (such as re-

pairs) in a significant and bona fide

sense. Such management decisions in-

clude:

•

Approving new tenants,

•

Deciding on rental terms,

•

Approving capital or repair expen-

ditures, and

•

Other similar decisions.

You are not considered to actively

participate if, at any time during the tax

year, your interest (including your spou-

se's interest) in the activity was less than

10% by value of all interests in the ac-

tivity. If you are a limited partner, you

are also not treated as actively partici-

pating in a partnership's rental real estate

activities.

Modified adjusted gross income. This

is your adjusted gross income from

Form 1040, 1040-SR, or Form

1040-NR, line 11, without taking into

account:

•

Any allowable passive activity

loss,

•

Rental real estate losses allowed

for real estate professionals (see Activi-

ties of real estate professionals, earlier),

•

Taxable social security or tier 1

railroad retirement benefits,

•

Deductible contributions to a tradi-

tional IRA or certain other qualified re-

tirement plans under section 219,

•

The student loan interest deduc-

tion,

•

The deduction for one-half of

self-employment tax,

•

The exclusion from income of in-

terest from series EE and I U.S. savings

bonds used to pay higher education ex-

penses,

•

Any excluded amounts under an

employer's adoption assistance program,

and

•

The deduction allowed for for-

eign-derived intangible income and

global intangible low-taxed income.

Recordkeeping

You must keep records to support items

reported on Schedule E in case the IRS

has questions about them. If the IRS ex-

amines your tax return, you may be

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asked to explain the items reported.

Good records will help you explain any

item and arrive at the correct tax with a

minimum of effort. If you do not have

records, you may have to spend time

getting statements and receipts from var-

ious sources. If you cannot produce the

correct documents, you may have to pay

additional tax and be subject to penal-

ties.

Specific

Instructions

Filers of Form 1041. If you are a fidu-

ciary filing Schedule E with Form 1041,

enter the estate's or trust's employer

identification number (EIN) in the space

for “Your social security number.”

Part I

Before you begin, see Line 3

and Line 4, later, to determine

if you should report your rental

real estate and royalty income on Sched-

ule C or Form 4835, instead of Sched-

ule E.

Qualified paid sick leave and qualified

paid family leave payroll tax credit.

The amount of any payroll tax credit

taken by an employer for qualified paid

sick leave and qualified paid family

leave under the Families First Coronavi-

rus Response Act (FFCRA) and the

American Rescue Plan Act (ARP). See

Form 941, lines 11b, 11d, 13c, and 13e;

and Form 944, lines 8b, 8d, 10d, and

10f. You must include the full amount

(both the refundable and nonrefundable

portions) of the credit for qualified sick

and family leave wages in gross income

on line 3 or 4, as applicable, for the tax

year that includes the last day of any cal-

endar quarter with respect to which a

credit is allowed.

Note. A credit is available only if the

leave was taken after March 31, 2020,

and before October 1, 2021, and only af-

ter the qualified leave wages were paid,

which might, under certain circumstan-

ces, not occur until a quarter after Sep-

tember 30, 2021, including quarters dur-

ing 2022. Accordingly, all lines related

to qualified sick and family leave wages

CAUTION

remain on the employment tax returns

for 2022.

Line A

If you made any payments in 2022 that

would require you to file any Forms

1099, check the “Yes” box. Otherwise,

check the “No” box. In general, if you

paid at least $600 for services performed

by someone who is not your employee

(nonemployee compensation), you must

file Form 1099-NEC; and, you generally

must file Form 1099-MISC if you paid

at least $600 in rents, prizes, medical

and health care payments, or other mis-

cellaneous amounts that would be in-

come to the person receiving them. See

the 2022 General Instructions for Cer-

tain Information Returns if you are un-

sure whether you were required to file

any Forms 1099. Also, see the separate

instructions for each Form 1099.

Income or Loss From

Rental Real Estate and

Royalties

Use Part I to report the following.

•

Income and expenses from rental

real estate (including personal property

leased with real estate).

•

Royalty income and expenses.

•

For an estate or trust only, farm

rental income and expenses based on

crops or livestock produced by the ten-

ant. Estates and trusts do not use Form

4835 or Schedule F (Form 1040) for this

purpose.

If you own a part interest in a rental

real estate property, report only your

part of the income and expenses on

Schedule E.

Complete lines 1a, 1b, and 2 for each

rental real estate property. For royalty

property, enter code “6” on line 1b and

leave lines 1a and 2 blank for that prop-

erty.

If you have more than three rental re-

al estate or royalty properties, complete

and attach as many Schedules E as you

need to list them. But answer lines A

and B and fill in lines 23a through 26 on

only one Schedule E. The figures on

lines 23a through 26 on that Schedule E

should be the combined totals for all

properties reported on your Schedules E.

If you are also using page 2 of Sched-

ule E, use the same Schedule E on

which you entered the combined totals

for Part I.

Personal property. Do not use Sched-

ule E to report income and expenses

from the rental of personal property,

such as equipment or vehicles. Instead,

use Schedule C if you are in the business

of renting personal property. You are in

the business of renting personal property

if the primary purpose for renting the

property is income or profit and you are

involved in the rental activity with con-

tinuity and regularity.

If your rental of personal property is

not a business, see the instructions for

Schedule 1 (Form 1040), lines 8l and

24b, to find out how to report the in-

come and expenses.

Extraterritorial income exclusion.

Except as otherwise provided in the In-

ternal Revenue Code, gross income in-

cludes all income from whatever source

derived. Gross income, however, does

not include extraterritorial income that is

qualifying foreign trade income under

certain circumstances. Use Form 8873 to

figure the extraterritorial income exclu-

sion. Report it on Schedule E as ex-

plained in the Instructions for Form

8873.

Chapter 11 bankruptcy cases. If you

were a debtor in a chapter 11 bankruptcy

case, see Chapter 11 Bankruptcy Cases

under Income in the Instructions for

Form 1040.

Income you report on Sched-

ule E may be qualified business

income and entitle you to a de-

duction on Form 1040, 1040-SR, or

1040-NR. See the Instructions for Form

8995-A for more information about this

deduction.

Line 1a

For rental real estate property only,

show the street address, city or town,

state, and ZIP code. If the property is lo-

cated in a foreign country, enter the city,

province or state, country, and postal

code.

Line 1b

Enter one of the codes listed under

“Type of Property” in Part I of the form.

Land rental. Enter code “5” for rental

of land. For details about the tax treat-

ment of income from this type of rental

TIP

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property, see Rental of Nondepreciable

Property in Pub. 925 .

Self-rental. Enter code “7” for

self-rental if you rent property to a trade

or business in which you materially par-

ticipated. See Rental of Property to a

Nonpassive Activity in Pub. 925 for de-

tails about the tax treatment of income

from this type of rental property.

Other. Enter code “8” if the property is

not one of the other types listed on the

form. Attach a statement to your return

describing the property.

Line 2

If you rented out a dwelling unit that

you also used for personal purposes dur-

ing the year, you may not be able to de-

duct all the expenses for the rental part.

“Dwelling unit” (unit) means a house,

apartment, condominium, mobile home,

boat, or similar property.

For each property listed on line 1a,

report the number of days in the year

each property was rented at fair rental

value and the number of days of person-

al use.

A day of personal use is any day, or

part of a day, that the unit was used by:

•

You for personal purposes;

•

Any other person for personal pur-

poses, if that person owns part of the

unit (unless rented to that person under a

“shared equity” financing agreement);

•

Anyone in your family (or in the

family of someone else who owns part

of the unit), unless the unit is rented at a

fair rental price to that person as his or

her main home;

•

Anyone who pays less than a fair

rental price for the unit; or

•

Anyone under an agreement that

lets you use some other unit.

Do not count as personal use:

•

Any day you spent working sub-

stantially full time repairing and main-

taining the unit, even if family members

used it for recreational purposes on that

day; or

•

Any days you used the unit as your

main home before or after renting it or

offering it for rent, if you rented or tried

to rent it for at least 12 consecutive

months (or for a period of less than 12

consecutive months at the end of which

you sold or exchanged it).

Whether or not you can deduct ex-

penses for the unit depends on whether

or not you used the unit as a home in

2022. You used the unit as a home if

your personal use of the unit was more

than the greater of:

•

14 days, or

•

10% of the total days it was rented

to others at a fair rental price.

If you did not use the unit as a home,

you can deduct all your expenses for the

rental part, subject to the at-risk rules

and the passive activity loss rules ex-

plained earlier.

If you did use the unit as a home and

rented the unit out for fewer than 15

days in 2022, do not report the rental in-

come and do not deduct any rental ex-

penses. If you itemize deductions on

Schedule A, you can deduct allowable

interest, taxes, and casualty losses.

If you did use the unit as a home and

rented the unit out for 15 or more days

in 2022, you may not be able to deduct

all your rental expenses. See Pub. 527

for more information.

Regardless of whether you used

the unit as a home, expenses

related to days of personal use

do not qualify as rental expenses. You

must allocate your expenses based on

the number of days of personal use to to-

tal use of the property. For example, you

used your property for personal use for

7 days and rented it for 63 days. In most

cases, 10% (7 ÷ 70) of your expenses

are not rental expenses and cannot be

deducted on Schedule E.

QJV. Check the box for “QJV” if you

owned the property as a member of a

qualified joint venture reporting income

not subject to self-employment tax. See

Qualified Joint Venture, earlier.

Line 3

If you received rental income from real

estate (including personal property

leased with real estate), report the in-

come on line 3. Use a separate column

(A, B, or C) for each rental property. In-

clude income received for renting a

room or other space.

Any other income should be included

and reported on line 3, with a statement

attached to your return.

If you received services or property

instead of money as rent, report the fair

market value of the services or property

as rental income on line 3.

CAUTION

Generally, rental real estate activity is

reported on Schedule E even if it is also

a trade or business activity; however, if

you provided significant services to the

renter, such as maid service, report the

rental activity on Schedule C, not on

Schedule E. Significant services do not

include the furnishing of heat and light,

cleaning of public areas, trash collec-

tion, or similar services.

If you were a real estate dealer, in-

clude only the rent received from real

estate (including personal property

leased with this real estate) you held for

the primary purpose of renting to pro-

duce income. Do not use Schedule E to

report income and expenses from rentals

of real estate you held for sale to cus-

tomers in the ordinary course of your

business as a real estate dealer. Instead,

use Schedule C for those rentals.

For more details on rental income,

see Pub. 527.

Rental income from farm production

or crop shares. Report farm rental in-

come and expenses on Form 4835 if:

•

You are an individual,

•

You received rental income based

on crops or livestock produced by the

tenant, and

•

You did not materially participate

in the management or operation of the

farm.

Line 4

Report on line 4 royalties from oil, gas,

or mineral properties (not including op-

erating interests); copyrights; and pat-

ents. Use a separate column (A, B, or C)

for each royalty property.

If you received $10 or more in royal-

ties during 2022, the payer should send

you a Form 1099-MISC or similar state-

ment by February 1, 2023, showing the

amount you received. Report this

amount on line 4.

If you are in business as a self-em-

ployed writer, inventor, artist, etc., re-

port your royalty income and expenses

on Schedule C, not on Schedule E.

You may be able to treat amounts re-

ceived as “royalties” for the transfer of a

patent or amounts received on the dis-

posal of coal and iron ore as the sale of a

capital asset. For details, see Pub. 544.

Enter on line 4 the gross amount of

royalty income, even if state or local

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taxes were withheld from oil or gas pay-

ments you received. Include taxes with-

held by the producer on line 16.

General Instructions for

Lines 5 Through 21

Enter your rental and royalty expenses

for each property in the appropriate col-

umn. You can deduct all ordinary and

necessary expenses, such as taxes, inter-

est, repairs, insurance, management fees,

agents' commissions, and depreciation.

Do not deduct the value of your own

labor or amounts paid for capital invest-

ments or capital improvements.

Enter your total expenses for mort-

gage interest (line 12), depreciation ex-

penses and depletion (line 18), and total

expenses (line 20) on lines 23c through

23e, respectively, even if you have only

one property.

Renting out part of your home. If you

rent out only part of your home or other

property, deduct the part of your expen-

ses that applies to the rented part.

Credit or deduction for access expen-

ditures. You may be able to claim a tax

credit for eligible expenditures paid or

incurred in 2022 to provide access to

your business for individuals with disa-

bilities. See Form 8826 for details.

You can also elect to deduct up to

$15,000 of qualified costs paid or incur-

red in 2022 to remove architectural or

transportation barriers to individuals

with disabilities and the elderly.

You cannot take both the credit and

the deduction for the same expenditures.

Line 6

You can deduct ordinary and necessary

auto and travel expenses related to your

rental activities, including 50% of meal

expenses incurred while traveling away

from home. However, business meals

are 100% deductible if the meals are

food and beverages provided by a res-

taurant and paid or incurred after De-

cember 31, 2020, and before January 1,

2023. For more information, see Notice

2021-25.

In most cases, you can either deduct

your actual expenses or take the stand-

ard mileage rate. You must use actual

expenses if you used more than four ve-

hicles simultaneously in your rental ac-

tivities (as in fleet operations). You can-

not use actual expenses for a leased ve-

hicle if you previously used the standard

mileage rate for that vehicle.

You can use the standard mileage

rate for 2022 only if you:

•

Owned the vehicle and used the

standard mileage rate for the first year

you placed the vehicle in service; or

•

Leased the vehicle and are using

the standard mileage rate for the entire

lease period (except the period, if any,

before 1998).

If you take the standard mileage rate,

multiply the number of miles driven in

connection with your rental activities by

58.5 cents a mile from January 1, 2022,

to June 30, 2022. Multiply the number

of miles driven in connection with your

rental activities from July 1, 2022, to

December 31, 2022, by 62.5 cents a

mile. Include this amount and your park-

ing fees and tolls on line 6.

You cannot deduct rental or

lease payments, depreciation,

or your actual auto expenses if

you use the standard mileage rate.

If you deduct actual auto expenses:

•

Include on line 6 the rental activity

portion of the cost of gasoline, oil, re-

pairs, insurance, tires, license plates,

etc.; and

•

Show auto rental or lease pay-

ments on line 19 and depreciation on

line 18.

If you claim any auto expenses (ac-

tual or the standard mileage rate), you

must complete Part V of Form 4562 and

attach Form 4562 to your tax return.

See Pub. 527 and Pub. 463 for de-

tails.

Line 10

Include on line 10 fees for tax advice

and the preparation of tax forms related

to your rental real estate or royalty prop-

erties.

Do not deduct legal fees paid or in-

curred to defend or protect title to prop-

erty, to recover property, or to develop

or improve property. Instead, you must

capitalize these fees and add them to the

property's basis.

CAUTION

Lines 12 and 13

In most cases, to determine the interest

expense allocable to your rental activi-

ties, you must have records to show how

the proceeds of each debt were used.

Specific tracing rules apply for allocat-

ing debt proceeds and repayment. See

Pub. 535 for details.

Limitation on business interest. Inter-

est you paid as part of your rental real

estate activity is not subject to the limi-

tation on business interest unless your

rental real estate activity is a trade or

business. If your rental real estate activi-

ty is a trade or business, you must file

Form 8990 to deduct any interest expen-

ses of that rental real estate activity un-

less you meet one of the filing excep-

tions in the Instructions for Form 8990.

If the interest you paid in your rental

real estate trade or business is limited,

figure the limit on your business interest

expenses on Form 8990 before complet-

ing lines 12 and 13. Follow the instruc-

tions under How to report, later, but re-

port the reduced interest on lines 12 and

13. The interest you can't deduct this

year will carry forward to next year on

Form 8990.

If your real estate activity is not a

trade or business or you meet one of the

filing exceptions for Form 8990, follow

the instructions under How to report,

later, and report all of your deductible

interest on lines 12 and 13.

How to report. If you have a mortgage

on your rental property, enter on line 12

the amount of interest you paid for 2022

to banks or other financial institutions.

Do not deduct prepaid interest when

you paid it. You can deduct it only in the

year to which it is properly allocable.

Points, including loan origination fees,

charged only for the use of money must

be deducted over the life of the loan.

If you paid $600 or more in interest

on a mortgage during 2022, the recipient

should send you a Form 1098 or similar

statement by February 1, 2023, showing

the total interest received from you.

If you paid more mortgage interest

than is shown on your Form 1098 or

similar statement, see Pub. 535 to find

out if you can deduct part or all of the

additional interest. If you can, enter the

entire deductible amount on line 12. At-

tach a statement to your return explain-

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ing the difference. In the space to the

left of line 12, enter “See attached.”

Note. If the recipient was not a finan-

cial institution or you did not receive a

Form 1098 from the recipient, report

your deductible mortgage interest on

line 13.

If you and at least one other person

(other than your spouse if you file a joint

return) were liable for and paid interest

on the mortgage, and the other person

received Form 1098, report your share

of the deductible interest on line 13. At-

tach a statement to your return showing

the name and address of the person who

received Form 1098. On the dotted line

next to line 13, enter “See attached.”

Line 14

You can deduct the amounts paid for re-

pairs and maintenance. However, you

cannot deduct the cost of improvements.

Repairs and maintenance costs are those

costs that keep the property in an ordina-

rily efficient operating condition. Exam-

ples are fixing a broken lock or painting

a room.

In contrast, improvements are

amounts paid to better or restore your

property or adapt it to a new or different

use. Examples of improvements are add-

ing substantial insulation or replacing an

entire HVAC system. Amounts paid to

improve your property must generally

be capitalized and depreciated (that is,

they cannot be deducted in full in the

year they are paid or incurred). See

Line 18, later.

Line 16

Do not reduce your deduction

for social security and Medi-

care taxes by the nonrefunda-

ble and refundable portions of the

FFCRA and ARP credits for qualified

sick and family leave wages claimed on

an employment tax return. Instead, re-

port the credits as income on line 3 or 4,

as applicable.

Line 17

You can deduct the cost of ordinary and

necessary telephone calls related to your

rental activities or royalty income (for

example, calls to the renter). However,

the base rate (including taxes and other

CAUTION

charges) for local telephone service for

the first telephone line into your resi-

dence is a personal expense and is not

deductible.

Line 18

Depreciation is the annual deduction

you must take to recover the cost or oth-

er basis of business or investment prop-

erty having a useful life substantially be-

yond the tax year. Land is not deprecia-

ble.

Depreciation starts when the property

is available and ready for use in your

business or for the production of in-

come. It ends when you deduct all your

depreciable cost or other basis or no lon-

ger use the property in your business or

for the production of income.

See the Instructions for Form 4562 to

figure the amount of depreciation to en-

ter on line 18.

You must complete and attach Form

4562 only if you are claiming:

•

Depreciation on property first

placed in service during 2022;

•

Depreciation on listed property

(defined in the Instructions for Form

4562), including a vehicle, regardless of

the date it was placed in service; or

•

A section 179 expense deduction

or amortization of costs that began in

2022.

See Pub. 527 for more information on

depreciation of residential rental proper-

ty. See Pub. 946 for a more comprehen-

sive guide to depreciation.

If you have an economic interest in

mineral property, you may be able to

take a deduction for depletion. Mineral

property includes oil and gas wells,

mines, and other natural deposits (in-

cluding geothermal deposits). See Pub.

535 for details.

Separating cost of land and buildings.

If you buy buildings and your cost in-

cludes the cost of the land on which they

stand, you must divide the cost between

the land and the buildings to figure the

basis for depreciation of the buildings.

The part of the cost that you allocate to

each asset is the ratio of the fair market

value of that asset to the fair market val-

ue of the whole property at the time you

buy it.

If you are not certain of the fair mar-

ket values of the land and the buildings,

you can divide the cost between them

based on their assessed values for real

estate tax purposes.

Line 19

Enter on line 19 any ordinary and neces-

sary expenses not listed on lines 5

through 18.

You may be able to deduct, on

line 19, part or all of the cost of modify-

ing existing commercial buildings to

make them energy efficient. For details,

see section 179D, Form 7205 and its

separate instructions, and Rev. Proc.

2022-14, 2022-7 I.R.B. 580, available at

Rev. Proc. 2022-14.

Line 21

If you have amounts for which you are

not at risk, use Form 6198 to determine

the amount of your deductible loss. En-

ter that amount in the appropriate col-

umn of Schedule E, line 21. In the space

to the left of line 21, enter “Form 6198.”

Attach Form 6198 to your return. For

details on the at-risk rules, see At-Risk

Rules, earlier.

Line 22

Do not complete line 22 if the amount

on line 21 is from royalty properties.

If you have a rental real estate loss

from a passive activity (defined earlier),

the amount of loss you can deduct may

be limited by the passive activity loss

rules. You may need to complete Form

8582 to figure the amount of loss, if any,

to enter on line 22. See the Instructions

for Form 8582 to determine if your loss

is limited.

If your rental real estate loss is not

from a passive activity or you meet the

exception for certain rental real estate

activities (explained earlier), you do not

have to complete Form 8582. Enter the

(loss) from line 21 on line 22.

If you have an unallowed rental real

estate loss from a prior year that after

completing Form 8582 you can include

this year, include that loss on line 22.

Parts II and III

If you need more space in Part II or III

to list your income or losses, attach a

continuation sheet using the same for-

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mat as shown in Part II or III. However,

be sure to complete the “Totals” col-

umns for lines 29a and 29b, or lines 34a

and 34b, as appropriate. If you also

completed Part I on more than one

Schedule E, use the same Schedule E on

which you entered the combined totals

in Part I.

Tax preference items. If you are a

partner, a shareholder in an S corpora-

tion, or a beneficiary of an estate or

trust, you must take into account your

share of preferences and adjustments

from these entities for the alternative

minimum tax on Form 6251 or Sched-

ule I (Form 1041).

Part II

Income or Loss From

Partnerships and S

Corporations

If you are a member of a partnership or

joint venture or a shareholder in an S

corporation, use Part II to report your

share of the partnership or S corporation

income (even if not received) or loss.

If you elected to be taxed as a

qualified joint venture instead

of a partnership, follow the re-

porting rules under Qualified Joint Ven-

ture, earlier.

You should receive a Schedule K-1

from the partnership or S corporation.

You should also receive a copy of the

Partner's or Shareholder's Instructions

for Schedule K-1. Your copy of Sched-

ule K-1 and its instructions will tell you

where on your return to report your

share of the items. If you did not receive

these instructions with your Sched-

ule K-1, see your tax return instructions

for how to get tax forms, instructions,

and publications. Do not attach Sched-

ules K-1 to your return. Keep them for

your records.

If you are treating items on your tax

return differently from the way the part-

nership or S corporation reported them

on its return, you may have to file Form

8082.

Special Rules That Limit Losses

If you report a loss from a partnership or

S corporation, your loss may be reduced

CAUTION

or not allowed this year. Apply the basis

rules, at-risk rules, and passive activity

loss rules to your loss on Schedule E.

If your loss is also subject to the ex-

cess business loss rules, you figure that

limitation separately on Form 461. Any

reduction to your loss due to the excess

business loss rules will not be reflected

on your Schedule E. See the Instructions

for Form 461 for more information.

Basis rules for partnerships. General-

ly, you may not claim your share of a

partnership loss (including a capital

loss) to the extent that it is greater than

the adjusted basis of your partnership in-

terest at the end of the partnership's tax

year. Any losses and deductions not al-

lowed this year because of the basis lim-

it can be carried forward indefinitely and

deducted in a later year subject to the

basis limit for that year. To figure the

basis of your interest in a partnership,

you can use the Worksheet for Adjusting

the Basis of a Partner's Interest in the

Partnership in the Partner's Instructions

for Schedule K-1 (Form 1065). For

more details on the basis rules for part-

nerships, see Pub. 541.

If you had a loss from a partnership

that was not allowed last year because of

the basis rules, but all or part is allowed

this year, see Line 27, later, for how to

report it.

After applying the basis rules, the

loss you report on Schedule E may be

further reduced by the at-risk rules and

passive activity loss rules.

Basis rules for S corporations. Gener-

ally, the deduction for your share of ag-

gregate losses and deductions reported

on Schedule K-1 (Form 1120-S) is limi-

ted to the basis of your stock (deter-

mined with regard to distributions re-

ceived during the tax year) and loans

from you to the corporation. The basis

of your stock is generally figured at the

end of the corporation's tax year. Any

losses and deductions not allowed this

year because of the basis limit can be

carried forward indefinitely and deduc-

ted in a later year subject to the basis

limit for that year. To figure your aggre-

gated stock basis, you can generally use

Form 7203. For more details on the ba-

sis rules for S corporations, see the In-

structions for Form 7203.

If you are claiming a deduction for

your share of an aggregate loss (or you

receive a distribution, dispose of stock,

or receive a loan repayment from an S

corporation), check the box on the ap-

propriate line in Part III, column (e), and

attach Form 7203 to your return.

If you had a loss from an S corpora-

tion that was not allowed last year be-

cause of the basis rules, but all or part is

allowed this year, see Line 27, later, for

how to report it.

After applying the basis rules, the

loss you report on Schedule E may be

further reduced by the at-risk rules and

passive activity loss rules.

At-risk rules. If you have (a) a loss or

other deduction from any activity car-

ried on as a trade or business or for the

production of income by the partnership

or S corporation, and (b) amounts in the

activity for which you are not at risk,

your loss may be limited. For more in-

formation, see At-Risk Rules, earlier.

If you are subject to the at-risk rules

for any activity, check the box on the

appropriate line in Part II, column (f), of

Schedule E, and use Form 6198 to figure

the amount of any deductible loss. If the

activity is nonpassive, enter any deducti-

ble loss from Form 6198 on the appro-

priate line in Part II, column (i), of

Schedule E.

If you had a loss from the partnership

or S corporation that was not allowed

last year because of the at-risk rules, but

all or part is allowed this year, see

Line 27, later, for how to report it.

After applying the at-risk rules, the

loss you report on Schedule E may be

further reduced by the passive activity

loss rules.

Passive activity loss rules. For more

information about passive activity los-

ses, see Passive Activity Loss Rules, ear-

lier.

If you have a passive activity loss, in

most cases you need to complete Form

8582 to figure the amount of the loss to

enter in Part II, column (g), for that ac-

tivity. But if you are a general partner or

an S corporation shareholder reporting

your share of a partnership or an S cor-

poration loss from a rental real estate ac-

tivity and you meet all of the conditions

listed earlier under Exception for Cer-

tain Rental Real Estate Activities, you

do not have to complete Form 8582. In-

stead, enter your (loss) in Part II, col-

umn (g).

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If you have passive activity income,

complete Part II, column (h), for that ac-

tivity. If you have nonpassive income or

losses, complete Part II, columns (i)

through (k), as appropriate.

If you had a loss from the partnership

or S corporation that was not allowed

last year because of the passive activity

loss rules, but all or part is allowed this

year, see Line 27, later, for how to report

it.

Excess business loss rules. If you re-

port a loss on Schedule E from a part-

nership or S corporation engaged in a

trade or business, use Form 461 to figure

your excess business loss. Your excess

business loss will not be reflected on

your Schedule E; instead, it will be add-

ed to your income on Form 1040 and

carried forward to a subsequent year as a

net operating loss. For more informa-

tion, see the Instructions for Form 461.

Domestic Partnerships

See the Schedule K-1 instructions before

entering on your return other partnership

items from a passive activity or income

or loss from any publicly traded partner-

ship.

You can deduct unreimbursed ordina-

ry and necessary expenses you paid on

behalf of the partnership if you were re-

quired to pay these expenses under the

partnership agreement. See Line 27, lat-

er, for how to report these expenses.

If you used loan proceeds to buy an

interest in, or make a contribution to the

capital of, a partnership (debt-financed

acquisition), report your share of deduc-

tible partnership interest expense on ei-

ther Schedule A or Schedule E, depend-

ing on the type of asset (or expenditure

if the allocation is based on the tracing

of loan proceeds) to which the interest

expense is allocated. See Line 28, later,

for more information about reporting

these interest expenses.

If you claimed a credit for federal tax

on gasoline or other fuels on your 2021

Form 1040, 1040-SR, or 1040-NR based

on information received from the part-

nership, enter as income in column (h)

or column (k), whichever applies, the

amount of the credit claimed for 2021.

Part or all of your share of partner-

ship income or loss from the operation

of the business may be considered net

earnings from self-employment that

must be reported on Schedule SE. Enter

the amount from Schedule K-1 (Form

1065), box 14, code A, on Schedule SE

after you reduce this amount by any al-

lowable expenses attributable to that in-

come.

Foreign Partnerships

Follow the instructions below in addi-

tion to the instructions earlier under Do-

mestic Partnerships.

If you are a U.S. person, you may

have received Forms 1099-B,

1099-DIV, and 1099-INT reporting your

share of certain partnership income, be-

cause payors of income to the foreign

partnership in most cases are required to

allocate and report payments of that in-

come directly to each of the partners of

the foreign partnership. If you received

both Schedule K-1 and Form 1099 for

the same type and source of partnership

income, report only the income shown

on Schedule K-1 in accordance with its

instructions.

If you are not a U.S. person, you may

have received Forms 1042-S reporting

your share of certain partnership in-

come, because payors of income to the

foreign partnership in most cases are re-

quired to allocate and report payments

of that income directly to each of the

partners of the foreign partnership. If

you received both Schedule K-1 and

Form 1042-S for the same type and

source of partnership income, report the

income on your return as follows.

•

For all income effectively connec-

ted with the conduct of a trade or busi-

ness in the United States, report only the

income shown on Schedule K-1 in ac-

cordance with its instructions.

•

For all income not effectively con-

nected with the conduct of a trade or

business in the United States, report on

Schedule NEC (Form 1040-NR) only

the income shown on Form 1042-S (if

you are required to file Form 1040-NR).

Requirement to file Form 8865. If you

are a U.S. person, you may have to file

Form 8865 if any of the following ap-

plies.

1. You controlled a foreign partner-

ship (that is, you owned more than a

50% direct or indirect interest in the

partnership).

2. You owned at least a 10% direct

or indirect interest in a foreign partner-

ship while U.S. persons controlled that

partnership.

3. You had an acquisition, disposi-

tion, or change in proportional interest

of a foreign partnership that:

a. Increased your direct interest to at

least 10% or reduced your direct interest

of at least 10% to less than 10%, or

b. Changed your direct interest by at

least a 10% interest.

4. You contributed property to a for-

eign partnership in exchange for a part-

nership interest if:

a. Immediately after the contribu-

tion, you owned, directly or indirectly,

at least a 10% interest in the partnership;

b. The value of the property you

contributed, when added to the value of

any other property you or any related

person contributed to the partnership

during the 12-month period ending on

the date of transfer, exceeds $100,000.

Also, you may have to file Form

8865 if you contributed property with

built-in gain to a foreign partnership (or

certain domestic partnerships) or to re-

port certain dispositions by a foreign

partnership of property you previously

contributed to that partnership if you

were a partner at the time of the disposi-

tion.

For more details, including penalties

for failing to file Form 8865, see Form

8865 and its separate instructions.

S Corporations

Distributions of prior year accumulated

earnings and profits of S corporations

are dividends and are reported on Form

1040 or 1040-SR, line 3b.

If you used loan proceeds to buy an

interest in, or make a contribution to the

capital of, an S corporation (debt-fi-

nanced acquisition), report your share of

deductible S corporation interest ex-

pense on either Schedule A or Sched-

ule E, depending on the type of asset (or

expenditure if the allocation is based on

the tracing of loan proceeds) to which

the interest expense is allocated. See

Line 28, later, for more information

about reporting these interest expenses.

Your share of the net income of an S

corporation is not subject to self-em-

ployment tax.

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Line 27

If you answered “Yes” on line 27, fol-

low the instructions below. If you do not

follow these instructions, the IRS may

send you a notice of additional tax due

because the amounts reported by the

partnership or S corporation on Sched-

ule K-1 do not match the amounts you

reported on your tax return.

Losses Not Allowed in Prior Years

Due to the Basis or At-Risk Rules

•

Enter your total prior year unal-

lowed losses that are now deductible on

a separate line in column (i) of line 28.

Do not combine these losses with, or net

them against, any current year amounts

from the partnership or S corporation.

•

Enter “PYA” in column (a) of the

same line.

Prior Year Unallowed Losses

From a Passive Activity Not

Reported on Form 8582

•

Enter on a separate line in column

(g) of line 28 your total prior year unal-

lowed losses not reported on Form 8582.

Such losses include prior year unal-

lowed losses now deductible because

you did not have an overall loss from all

passive activities or you disposed of

your entire interest in a passive activity

in a fully taxable transaction. Do not

combine these losses with, or net them

against, any current year amounts from

the partnership or S corporation.

•

Enter “PYA” in column (a) of the

same line.

Unreimbursed Partnership

Expenses

You can deduct unreimbursed ordinary

and necessary partnership expenses you

paid on behalf of the partnership on

Schedule E if you were required to pay

these expenses under the partnership

agreement. You can only deduct unreim-

bursed expenses on Schedule E that are

trade or business expenses under section

162. Don't report unreimbursed partner-

ship expenses separately if the expenses

are from a passive activity and you are

required to file Form 8582; otherwise,

do the following.

•

Enter unreimbursed partnership

expenses from nonpassive activities on a

separate line in column (i) of line 28. Do

not combine these expenses with, or net

them against, any other amounts from

the partnership.

•

If the expenses are from a passive

activity and you are not required to file

Form 8582, enter the expenses related to

a passive activity on a separate line in

column (g) of line 28. Do not combine

these expenses with, or net them against,

any other amounts from the partnership.

•

Enter “UPE” in column (a) of the

same line.

Line 28

For nonpassive income or loss and pas-

sive income or losses for which you are

not filing Form 8582, enter in the appli-

cable column of line 28 your current

year ordinary income or loss (after ap-

plying any special rules that limit losses)

from the partnership or S corporation.

Report each related item required to be

reported on Schedule E (including items

of income or loss stated separately on

Schedule K-1) in the applicable column

of a separate line following the line on

which you reported the current year or-

dinary income or loss. Also, enter a de-

scription of the related item (for exam-

ple, depletion) in column (a) of the same

line.

If you are required to file Form 8582,

see the Instructions for Form 8582 be-

fore completing Schedule E.

Debt-financed acquisition. A debt-fi-

nanced acquisition is the use of loan

proceeds to buy an interest in, or to

make a contribution to the capital of, a

partnership or S corporation. You must

allocate the loan proceeds and the rela-

ted interest expense among all the assets

of the entity. You can use any reasona-

ble method.

For interest allocated to trade or busi-

ness assets (or expenditures), report the

interest on a separate line of your Sched-

ule E, Part II. Enter "business interest"

and the name of the partnership or S cor-

poration in column (a) and the amount

in column (i).

For interest allocated to passive activ-

ity use, enter the interest on Form 8582

as a deduction from the passive activity

of the partnership or S corporation.

Show any deductible amount on a sepa-

rate line on your Schedule E, Part II. En-

ter "passive interest" and the name of the

entity in column (a) and the amount in

column (g).

For interest allocated to investment

use, enter the interest on Form 4952.

Carry any deductible amount allocated

to royalties to a separate line of your

Schedule E, Part II. Enter "investment

interest" and the name of the entity in

column (a) and the amount in column

(i). Carry the balance of the deductible

amount to Schedule A, line 9.

Any interest allocated to proceeds

used for personal purposes is generally

not deductible.

For more information on allocating

and reporting these interest expenses,

see Notice 88-37 in Cumulative Bulletin

1988-1. Also, see Notice 89-35 in Cu-

mulative Bulletin 1989-1.

Owners of S corporation stock and

debt. If you report a loss, receive a dis-

tribution, dispose of stock, or receive a

loan repayment from an S corporation,

you must check the box in column (e) on

line 28 and attach the required basis

computation. For more information, see

Basis rules for S corporations, earlier.

Part III

Income or Loss From

Estates and Trusts

If you are a beneficiary of an estate or

trust, use Part III to report your part of

the income (even if not received) or loss.

You should receive a Schedule K-1

(Form 1041) from the fiduciary. Your

copy of Schedule K-1 and its instruc-

tions will tell you where on your return

to report the items from Schedule K-1.

Do not attach Schedule K-1 to your re-

turn. Keep it for your records.

If you are treating items on your tax

return differently from the way the es-

tate or trust reported them on its return,

you may have to file Form 8082.

If you have estimated taxes credited

to you from a trust (Schedule K-1 (Form

1041), box 13, code A), enter “ES pay-

ment claimed” and the amount on the

dotted line next to line 37. Do not in-

clude this amount in the total on line 37.

Instead, enter the amount on Form 1040,

1040-SR, or 1040-NR, line 26.

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A U.S. person who transferred prop-

erty to a foreign trust may have to report

the income received by the trust as a re-

sult of the transferred property if, during

2022, the trust had a U.S. beneficiary.

See section 679. An individual who re-

ceived a distribution from, or who was

the grantor of or transferor to, a foreign

trust must also complete Part III of

Schedule B (Form 1040) and may have

to file Form 3520. In addition, the owner

of a foreign trust must ensure that the

trust files an annual information return

on Form 3520-A.

Part IV

Income or Loss From Real

Estate Mortgage Investment

Conduits (REMICs)

If you are the holder of a residual inter-

est in a REMIC, use Part IV to report

your total share of the REMIC's taxable

income or loss for each quarter included

in your tax year. You should receive

Schedule Q (Form 1066) and instruc-

tions from the REMIC for each quarter.

Do not attach Schedule(s) Q to your re-

turn. Keep it for your records.

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.

If you are the holder of a residual in-

terest in more than one REMIC, attach a

continuation sheet using the same for-

mat as in Part IV. Enter the combined

totals of columns (d) and (e) on Sched-

ule E, line 39. If you also completed Part

I on more than one Schedule E, use the

same Schedule E on which you entered

the combined totals in Part I.

REMIC income or loss is not income

or loss from a passive activity.

Note. If you are the holder of a regular

interest in a REMIC, do not use Sched-

ule E to report the income you received.

Instead, report it on Form 1040 or

1040-SR, line 2b.

Column (c). Report the total of the

amounts shown on Schedule(s) Q,

line 2c. This is the smallest amount you

are allowed to report as your taxable in-

come (Form 1040, 1040-SR, or

1040-NR, line 15). It is also the smallest

amount you are allowed to report as

your alternative minimum taxable in-

come (AMTI) on Form 6251, line 4.

If the amount in column (c) is larger

than your taxable income would other-

wise be, enter the amount from column

1040-NR, line 15. Similarly, if the

amount in column (c) is larger than your

AMTI would otherwise be, enter the

amount from column (c) on Form 6251,

line 4. Enter “Sch Q” on the dotted line

to the left of this amount on Form 1040,

1040-SR, or 1040-NR, line 15; and

Form 6251, line 4, if applicable.

Note. These rules also apply to estates

and trusts that hold a residual interest in

a REMIC. Be sure to make the appropri-

ate entries on the comparable lines on

Form 1041.

Do not include the amount

shown in column (c) in the total

on Schedule E, line 39.

Column (e). Report the amount(s)

shown on Schedule(s) Q, line 3b.

Part V Summary

Line 42

Special estimated tax rules may apply if

you have gross farming or fishing in-

come. You will not be charged a penalty

for underpayment of estimated tax if:

1. Your gross farming or fishing in-

come for 2021 or 2022 is at least

two-thirds of your gross income; and

CAUTION

2. You file your 2022 tax return and

pay the tax due by March 1, 2023.

For details, see chapter 15 of Pub. 225.

Paperwork Reduction Act Notice. We

ask for the information on this form to

carry out the Internal Revenue laws of

the United States. You are required to

give us the information. We need it to

ensure that you are complying with

these laws and to allow us to figure and

collect the right amount of tax.

You are not required to provide the

information requested on a form that is

subject to the Paperwork Reduction Act

unless the form displays a valid OMB

control number. Books or records relat-

ing to a form or its instructions must be

retained as long as their contents may

become material in the administration of

any Internal Revenue law. Generally,

tax returns and return information are

confidential, as required by section

6103.

The time needed to complete and file

this form will vary depending on indi-

vidual circumstances. The estimated

burden for individual taxpayers filing

this form is included in the estimates

shown in the instructions for their indi-

vidual income tax return. The estimated

burden for all other taxpayers who file

this form is approved under OMB con-

trol number 1545-1972 and is shown

next.

Recordkeeping ......... 3 hr., 39 min.

Learning about the law or the

form ............... 2 hr., 16 min.

Preparing the form ...... 3 hr., 25 min.

Copying, assembling, and

sending the form to the IRS . 34 min.

If you have comments concerning the

accuracy of these time estimates or sug-

gestions for making this form simpler,

we would be happy to hear from you.

See the instructions for the tax return

with which this form is filed.

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