Schedule E expense categories for landlords
If you own a rental property in the U.S., your rental income and expenses are generally reported on Schedule E (Form 1040), Part I. Organizing your books by the same categories all year makes tax time a hand-off instead of a project.
The Schedule E lines
| Line | Category | Typical examples |
|---|---|---|
| 3 | Rents received | Monthly rent, late fees and other rent-type income |
| 5 | Advertising | Listing fees, signs |
| 6 | Auto and travel | Trips to the property for rental activity |
| 7 | Cleaning and maintenance | Turnover cleaning, lawn care, routine upkeep |
| 8 | Commissions | Leasing commissions |
| 9 | Insurance | Landlord or hazard policy premiums |
| 10 | Legal and other professional fees | Attorney, tax preparer |
| 11 | Management fees | Property manager fees |
| 12 | Mortgage interest paid to banks, etc. | Interest portion of the mortgage payment (Form 1098) |
| 13 | Other interest | Interest on other loans used for the rental |
| 14 | Repairs | Fixing a leak, replacing a broken fixture |
| 15 | Supplies | Small items used in the rental |
| 16 | Taxes | Property taxes |
| 17 | Utilities | Utilities the owner pays |
| 18 | Depreciation expense or depletion | Usually calculated by your tax preparer |
| 19 | Other | HOA dues, pest control, bank fees and similar |
Line 4 is royalties and does not apply to most landlords. Line 20 is the total of lines 5 through 19.
Repairs vs. improvements
A repair keeps the property in working order and is generally expensed. An improvement that adds value, extends the property's life or adapts it to a new use is generally capitalized and depreciated instead. When in doubt, record it separately and ask your tax preparer.
Don't count these as expenses
- Security deposits you expect to return are a liability, not income.
- Mortgage principal reduces the loan; only the interest goes on line 12.
A 20-minute monthly routine
- Record each unit's rent received against what was due.
- Log every bill with its date, vendor, property and Schedule E category.
- Save the receipt with the same date and vendor so you can match it later.
- Check the month's profit and loss by property.
At year end, the category totals per property are what your preparer needs for Part I.
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For planning and information only. Not financial, tax, legal or investment advice.