Table of Contents
- Part I
- Parts II and III
- Part II
- Part III
- Part IV
- Part VSummary
If you made any payments in 2016 that would require you to file any Forms 1099, check the “Yes” box. Otherwise, check the “No” box. See the 2016 General Instructions for Certain Information Returns if you are unsure whether you were required to file any Forms 1099. Also see the separate instructions for each Form 1099.
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 tenant. 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 property.
If you have more than three rental real 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 Schedule E, use the same Schedule E on which you entered the combined totals for Part I.
For rental real estate property only, show the street address, city or town, state, and ZIP code. If the property is located in a foreign country, enter the city, province or state, country, and postal code.
Enter one of the codes listed under “Type of Property” in Part I of the form.
If you rented out a dwelling unit that you also used for personal purposes during the year, you may not be able to deduct 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 personal 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 purposes, 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 substantially full time repairing and maintaining 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 expenses for the unit depends on whether or not you used the unit as a home in 2016. 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 explained earlier.
If you did use the unit as a home and rented the unit out for fewer than 15 days in 2016, do not report the rental income and do not deduct any rental expenses. 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 2016, you may not be able to deduct all your rental expenses. You can deduct all the following expenses for the rental part on Schedule E.
Real estate taxes.
Other rental expenses not related to your use of the unit as a home, such as advertising expenses and rental agents' fees.
If any income is left after deducting these expenses, you can deduct other expenses, including depreciation, up to the amount of remaining income. You can carry over to 2017 the amounts you cannot deduct.
See Pub. 527 for details.
If you received rental income from real estate (including personal property leased with real estate), report the income on line 3. Use a separate column (A, B, or C) for each rental property. Include income received for renting a room or other space.
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.
If you provided significant services to the renter, such as maid service, report the rental activity on Schedule C or C-EZ, not on Schedule E. Significant services do not include the furnishing of heat and light, cleaning of public areas, trash collection, or similar services.
If you were a real estate dealer, include only the rent received from real estate (including personal property leased with this real estate) you held for the primary purpose of renting to produce income. Do not use Schedule E to report income and expenses from rentals of real estate you held for sale to customers in the ordinary course of your business as a real estate dealer. Instead use Schedule C or C-EZ for those rentals.
For more details on rental income, see Pub. 527.
Report on line 4 royalties from oil, gas, or mineral properties (not including operating interests); copyrights; and patents. Use a separate column (A, B, or C) for each royalty property.
If you received $10 or more in royalties during 2016, the payer should send you a Form 1099-MISC or similar statement by January 31, 2017, showing the amount you received. Report this amount on line 4.
If you are in business as a self-employed writer, inventor, artist, etc., report your royalty income and expenses on Schedule C or C-EZ.
You may be able to treat amounts received as “royalties” for the transfer of a patent or amounts received on the disposal 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 rent and royalty income, even if state or local taxes were withheld from oil or gas payments you received. Include taxes withheld by the producer on line 16.
Enter your rental and royalty expenses for each property in the appropriate column. You can deduct all ordinary and necessary expenses, such as taxes, interest, repairs, insurance, management fees, agents' commissions, and depreciation.
Do not deduct the value of your own labor or amounts paid for capital investments or capital improvements.
Enter your total expenses for mortgage interest (line 12), depreciation expenses and depletion (line 18), and total expenses (line 20) on lines 23c through 23e, respectively, even if you have only one property.
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. In most cases, you can either deduct your actual expenses or take the standard mileage rate. You must use actual expenses if you used more than four vehicles simultaneously in your rental activities (as in fleet operations). You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle.
You can use the standard mileage rate for 2016 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 54 cents a mile. Include this amount and your parking fees and tolls on line 6.
If you deduct actual auto expenses:
Include on line 6 the rental activity portion of the cost of gasoline, oil, repairs, insurance, tires, license plates, etc., and
Show auto rental or lease payments on line 19 and depreciation on line 18.
If you claim any auto expenses (actual 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 details.
Include on line 10 fees for tax advice and the preparation of tax forms related to your rental real estate or royalty properties.
Do not deduct legal fees paid or incurred to defend or protect title to property, to recover property, or to develop or improve property. Instead, you must capitalize these fees and add them to the property's basis.
In most cases, to determine the interest expense allocable to your rental activities, you must have records to show how the proceeds of each debt were used. Specific tracing rules apply for allocating debt proceeds and repayment. See Pub. 535 for details.
If you have a mortgage on your rental property, enter on line 12 the amount of interest you paid for 2016 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 2016, the recipient should send you a Form 1098 or similar statement by January 31, 2017, 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. Attach a statement to your return explaining the difference. In the space to the left of line 12, enter “See attached.”
If the recipient was not a financial 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. Attach 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.”
You can deduct the amounts paid for repairs and maintenance. However, you cannot deduct the cost of improvements. Repairs and maintenance costs are those costs that keep the property in an ordinarily efficient operating condition. Examples 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 adding substantial insulation or replacing an entire HVAC system. Amounts paid to improve your property generally must be capitalized and depreciated (that is, they cannot be deducted in full in the year they are paid or incurred). See Line 18, later.
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 charges) for local telephone service for the first telephone line into your residence is a personal expense and is not deductible.
Depreciation is the annual deduction you must take to recover the cost or other basis of business or investment property having a useful life substantially beyond the tax year. Land is not depreciable.
Depreciation starts when you first use the property in your business or for the production of income. It ends when you deduct all your depreciable cost or other basis or no longer 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 enter on line 18.
You must complete and attach Form 4562 only if you are claiming:
Depreciation on property first placed in service during 2016,
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 2016.
See Pub. 527 for more information on depreciation of residential rental property. See Pub. 946 for a more comprehensive 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 (including geothermal deposits). See Pub. 535 for details.
If you have amounts for which you are not at risk, use Form 6198 to determine the amount of your deductible loss. Enter that amount in the appropriate column 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.
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 deduct this year, include that loss on line 22.
If you need more space in Part II or III to list your income or losses, attach a continuation sheet using the same format as shown in Part II or III. However, be sure to complete the “Totals” columns 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.
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.
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 Schedule 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 Schedule K-1, see the instructions for Form 1040 or Form 1040NR for how to get tax forms, instructions, and publications. Do not attach Schedules K-1 to your return. Keep them for your records.
If you are treating items on your tax return differently from the way the partnership (other than an electing large partnership) or S corporation reported them on its return, you may have to file Form 8082. If you are a partner in an electing large partnership, you must report the items shown on Schedule K-1 (Form 1065-B) on your tax return the same way the partnership reported the items on Schedule K-1.
If you have an interest in a partnership or S corporation that is involved in a farming business, your losses may be limited if the partnership accepted certain subsidies. You will be notified on the Schedule K-1 if the partnership or S corporation received one of these subsidies. Use Worksheet 1 on the last page of these instructions to determine if you have an excess farm loss for the current year. See the Instructions for Schedule F for more details on how to complete the worksheet. If you had a loss from a partnership or S corporation that was not allowed last year because of the excess farm loss rules, see Line 27 later, for how to report it.
If you have a current year loss, or a prior year unallowed loss, from a partnership or an S corporation, see At-Risk Rules and Passive Activity Loss Rules, earlier.
Partners and S corporation shareholders should get a separate statement of income, expenses, deductions, and credits for each activity engaged in by the partnership and S corporation. If you are subject to the at-risk rules for any activity, check the box on the appropriate line in Part II, column (e) of Schedule E, and use Form 6198 to figure the amount of any deductible loss. If the activity is nonpassive, enter any deductible loss from Form 6198 on the appropriate line in Part II, column (h) of Schedule E.
If you have a passive activity loss, in most cases you need to complete Form 8582 to figure the amount of the allowable loss to enter in Part II, column (f), for that activity. But if you are a general partner or an S corporation shareholder reporting your share of a partnership or an S corporation loss from a rental real estate activity and you meet all of the conditions listed earlier under Exception for Certain Rental Real Estate Activities, you do not have to complete Form 8582. Instead, enter your allowable loss in Part II, column (f).
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 partnership.
You can deduct unreimbursed ordinary and necessary expenses you paid on behalf of the partnership if you were required to pay these expenses under the partnership agreement. See Line 27, later, 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 deductible partnership interest expense on either Schedule A or Schedule 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 for more information about reporting these interest expenses.
If you claimed a credit for federal tax on gasoline or other fuels on your 2015 Form 1040 or Form 1040NR based on information received from the partnership, enter as income in column (g) or column (j), whichever applies, the amount of the credit claimed for 2015.
Part or all of your share of partnership 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 (or from Schedule K-1 (Form 1065-B), box 9 (code J1)), on Schedule SE, after you reduce this amount by any allowable expenses attributable to that income.
Follow the instructions below in addition to the instructions earlier for Domestic 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, because payors of income to the foreign partnership in most cases are required 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 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 income, because payors of income to the foreign partnership in most cases are required 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 connected with the conduct of a trade or business in the United States, report only the income shown on Schedule K-1 in accordance with its instructions.
For all income not effectively connected with the conduct of a trade or business in the United States, report on page 4 of Form 1040NR only the income shown on Form 1042-S (if you are required to file Form 1040NR).
You controlled a foreign partnership (that is, you owned more than a 50% direct or indirect interest in the partnership).
You owned at least a 10% direct or indirect interest in a foreign partnership while U.S. persons controlled that partnership.
You had an acquisition, disposition, or change in proportional interest of a foreign partnership that:
Increased your direct interest to at least 10% or reduced your direct interest of at least 10% to less than 10%, or
Changed your direct interest by at least a 10% interest.
You contributed property to a foreign partnership in exchange for a partnership interest if:
Immediately after the contribution, you owned, directly or indirectly, at least a 10% interest in the partnership, or
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.
If you are a shareholder in an S corporation, your share of the corporation's aggregate losses and deductions (combined income, losses, and deductions) is in most cases limited to the adjusted basis of your corporate stock and any debt the corporation owes you. Any loss or deduction not allowed this year because of the basis limitation can be carried forward and deducted in a later year subject to the basis limitation for that year.
If you are claiming a deduction for your share of an aggregate loss, attach to your return a computation of the adjusted basis of your corporate stock and of any debt the corporation owes you. See the Schedule K-1 instructions for details.
After applying the basis limitation, the deductible amount of your aggregate losses and deductions may be further reduced by the at-risk rules and the passive activity loss rules. See At-Risk Rules and Passive Activity Loss Rules, earlier.
Distributions of prior year accumulated earnings and profits of S corporations are dividends and are reported on Form 1040, line 9a.
If you used loan proceeds to buy an interest in, or make a contribution to the capital of, an S corporation (debt-financed acquisition), report your share of deductible S corporation interest expense on either Schedule A or Schedule 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 for more information about reporting these interest expenses.
Your share of the net income of an S corporation is not subject to self-employment tax.
If you answered “Yes” on line 27, follow 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 Schedule K-1 do not match the amounts you reported on your tax return.
Enter your total prior year unallowed losses that are now deductible on a separate line in column (h) 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.
Enter on a separate line in column (f) of line 28 your total prior year unallowed losses not reported on Form 8582. Such losses include prior year unallowed 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.
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 (except amounts deductible only as itemized deductions, which you must enter on Schedule A).
Enter unreimbursed partnership expenses from nonpassive activities on a separate line in column (h) 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 (f) 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.
For nonpassive income or loss (and passive income or losses for which you are not filing Form 8582), enter in the applicable column of line 28 your current year ordinary income or loss 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 ordinary income or loss. Also enter a description of the related item (for example, depletion) in column (a) of the same line.
If you are required to file Form 8582, see the Instructions for Form 8582 before completing Schedule E.
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 instructions will tell you where on your return to report the items from Schedule K-1. Do not attach Schedule K-1 to your return. Keep it for your records.
If you are treating items on your tax return differently from the way the estate 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 (Form 1041, Schedule K-1, box 13, code A), enter “ES payment claimed” and the amount on the dotted line next to line 37. Do not include this amount in the total on line 37. Instead, enter the amount on Form 1040, line 65, or Form 1040NR, line 63.
A U.S. person who transferred property to a foreign trust may have to report the income received by the trust as a result of the transferred property if, during 2016, the trust had a U.S. beneficiary. See section 679. An individual who received a distribution from, or who was the grantor of or transferor to, a foreign trust must also complete Part III of Schedule B (Form 1040A or 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.
If you are the holder of a residual interest 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 instructions from the REMIC for each quarter. Do not attach Schedule(s) Q to your return. Keep them 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 interest in more than one REMIC, attach a continuation sheet using the same format as in Part IV. Enter the combined totals of columns (d) and (e) on Schedule 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.
If you are the holder of a regular interest in a REMIC, do not use Schedule E to report the income you received. Instead, report it on Form 1040, line 8a.
These rules also apply to estates and trusts that hold a residual interest in a REMIC. Be sure to make the appropriate entries on the comparable lines on Form 1041.
You will not be charged a penalty for underpayment of estimated tax if:
Your gross farming or fishing income for 2015 or 2016 is at least two-thirds of your gross income, and
You file your 2016 tax return and pay the tax due by March 1, 2017.
|Recordkeeping||3 hrs., 3 min.|
|Learning about the law or the form||1 hr., 2 min.|
|Preparing the form||1 hr., 34 min.|
|Copying, assembling, and sending the form to the IRS||34 min.|
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