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1 USE OF SCH-E

2 RENTAL INCOMERENTAL INCOME

3 RENTAL EXPENSESRENTAL EXPENSES

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4 PARTLY LET OUT PROPERTY PARTLY LET OUT PROPERTY

5 PERSONAL USE OFPERSONAL USE OFDWELLING UNITDWELLING UNIT

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SCHEDULE-E RENTAL INCOME & EXPENSES

Schedule E (Form 1040) to report income or loss from rental real estate,royalties,

1 .Rental income is payment received for the use or occupation of property, 2. Unearned income except if services are provided with the use of property;Example: Jack has a property which he rents out as a boarding house. Sincethis involves providing services along with renting out, Jack has to report it asbusiness income and not rental income 3. Includes current payments of rent,advance rent, late ayments, expenses paid by tenant and lease cancellationcharges but does not include security charges; Example : Jim, a tenant of James pays the water bill for the rented property of $250 for March 2003. Jimpays the rent for the month of March 2003 net of the water expenses. Jameshas to add $250 to his income; he can however deduct the expense as rental

expense if deductible

1.Deduct expenses in the year of payment;2.Deductible expenses include advertising, cleaning & maintenance, utilities,insurance, taxes, interest, points, commissions, tax return preparation fees,rental payments etc.3 Repairs to keep the property in operating condition can be deducted. Repairswhich are part of extensive remodeling of the property and improvements cannot be deducted. They have to be added to the cost of the property anddepreciation can be claimed.4.Travel expenses can be deducted if the primary purpose is collection of rent.If the taxpayer uses car for travel, standard mileage rate or actual expenseswhichever is beneficial can be deducted.5.Ordinary & necessary expenses of managing, conserving or maintainingvacant property are deductible;6.For condominiums and co-operative apartments, taxpayers share of upkeepcharges/maintenance charges, dues and assessments can be deducted.However, the payment towards capital improvements have to be capitalized.

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1.Same property used for both rental and personal purposes;2.Expenses have to be divided between rental and personal use. Expensesrelating to rental only can be claimed on Sch E and expenses relating topersonal use can be claimed if allowed as itemized deduction;3.The most common method of dividing the expenses is square footage of thehome;Other reasonable methods can be used like number of rooms, number of persons using etc.

If a dwelling unit is used as home and it is let out for less than 15 days during ayear, then no rental income/ deductions are reportable;Property is considered used as home if the use for personal purposes is formore than greater of

14 days or10% of the total days it is rented to others; Example : Mahima owns a beach cottage which she used for 15 days in themonth of March 2005. She let it out from April to September 2005. Since the10% of rental use of property is 18 and Mahima used it for less than 18days,she is not considered as using it as a home;Rental expenses can be deducted only to the extent of income;

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Types Of Source Document For Schedule E1 Organizer Page2 1099-MISC3 Handwritten Information

4 Typed Information/Printed Income Summary

SOURCE DOC

1 Organizer

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4 Printed Income

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MENT

Page

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Information

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Summary

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Input Screens i1E-12E-23E-3

4 DP-15M-3

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Tax Softwares

Description

The kind of property you rentedThe street address, city or town, and You do not have to give the ZIP code.Your percentage of ownership in the property, if less than 100%

Rental Income

Report on line 4 royalties from oil, gas, or mineral properties, copyrights and

DepreciationAt-Risk Limitation

If you rented out a dwelling unit that you also used for personal purposesduring the the year, you may not be able to deduct all the expenses for therental part.So entry should be made in appropriate Boxes for the of calculation of Vacation Home on E-2.

Enter your rental and royalty expenses for each property in the appropriatecolumn. You can deduct all ordinary and necessary expenses, such as taxes,interest, repairs, insurance, management fees, agents' commissions, anddepreciation,etc.

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E1 E2 DP1 M-3Input Screen Box Box Output

E-1 31 Line-1 on Sch-EE-1 32E-1 38

E-2 60 to 76 Line-2 on Sch-E

E-1 70 Line-3 on Sch-E

E-2 80 to 103 Line-4 on Sch-E

E-1 76 to 165 Line-5 to 21 on S

E-3 & DP-1 30 to 35 Line 20 on Sch-EM-3 30 to 75 Line 22 on Sch-E

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h-E