Schedule E

Out of Scope:

  • Royalties or rent with expenses
  • Rental income (SEE NOTE BELOW)
  • Rental when Not for Profit
  • Casualty losses
  • Completing Form 8582 (Passive activity loss limitations)
  • Payments requiring filing of Form 1099
  • Income or loss from partnerships or S corporations
  • Income or loss from estates or trusts or REMICS
  • Farm rental income or loss

Royalties reported on a Schedule K-1:

Federal Section > Income > Other Income > K1 Earnings

  • Enter the K-1 data. The Schedule E will be created from the K-1 information.
  • Depletion allowance has already been accounted for, so no additional input is needed

Royalties reported on a 1099-MISC:

Federal Section > Income > Form 1099-Misc

  • After entering the 1099-Misc data, continue, and opt to create a Schedule E. Enter 100% ownership and continue.
  • If from Oil or Gas, choose the Expenses menu and enter 15% of the royalty amount under the Expenses > Amount to Adjust Depreciation Expense or Depletion category.
  • If the client has a DR0021W showing ad valorem and severance taxes withheld, they can be entered on the Schedule E. If the client receives a refund of that tax by filing a Severance Tax return (DR0021) however, they will have to declare it as taxable income next year if they deducted it this year on Schedule E. We are not trained on this form.

Rent:

  • If only land with no depreciation or expenses and reported on a 1099-MISC, it is IN SCOPE. Enter as described for Royalties.
  • Home rental of less than 15 days is not taxable nor reportable.
    • If a 1099-MISC was received, enter it, and
    • Enter the income amount as an expense on line 19.
  • If 15 days or more, it is OUT OF SCOPE unless you have Military Certification.
  • f reported on a K-1, it is OUT OF SCOPE
  • Property taxes can be included on Schedule A.