IRS Schedule E Guide for Landlords: How to Report Rental Income and Expenses

If you own rental property, you fill out Schedule E (Form 1040) every year. It's where you report rental income, deductible expenses, and depreciation. Getting it right means paying less tax. Getting it wrong means an audit headache.

This guide covers what goes on Schedule E, what expenses you can deduct, and how to make the whole process less painful.

Note: This is educational content, not tax advice. Talk to a CPA or tax professional about your specific situation. Tax laws change, and your circumstances are unique.

What Is Schedule E?

Schedule E (Supplemental Income and Loss) is the IRS form where you report income and expenses from rental real estate, royalties, partnerships, and S corporations. Part I is for rental real estate. That's what we're covering here.

You fill out one Schedule E for all your rental properties (up to 3 per page, with additional pages for more). Each property gets its own column.

What Income to Report

Rent payments. All rent collected during the tax year, regardless of what period it covers.
Late fees. Late fees collected from tenants are rental income.
Security deposits spent. If you kept part of a security deposit for repairs or unpaid rent, that's income in the year you kept it. (Deposits you're holding and plan to return are not income.)
Tenant-paid expenses. If the tenant pays your property's water bill directly to the utility, that's income to you and a deductible expense.

Deductible Expense Categories (Schedule E Lines 5-19)

Here's what you can deduct, organized by the Schedule E line items:

Line	Category	Examples
5	Advertising	Zillow listing fees, yard signs, newspaper ads
6	Auto and travel	Mileage driving to properties (56.5 cents/mile for 2025)
7	Cleaning and maintenance	Cleaning between tenants, lawn care, snow removal, minor repairs
8	Commissions	Leasing agent fees, property manager commissions
9	Insurance	Landlord insurance, liability insurance, umbrella policy (rental portion)
10	Legal and professional fees	Lawyer fees, accountant fees, eviction costs
11	Management fees	Property management company fees
12	Mortgage interest	Interest paid on rental property mortgage (not principal)
13	Other interest	Interest on loans for rental property improvements
14	Repairs	Fixing a leaky faucet, replacing a broken window, patching drywall
15	Supplies	Tools, paint, cleaning supplies, light bulbs for common areas
16	Taxes	Property taxes, any local rental taxes
17	Utilities	Water, gas, electric, trash (that you pay, not the tenant)
18	Depreciation	Residential: straight-line over 27.5 years
19	Other	HOA fees, pest control, software subscriptions

Repairs vs Improvements

This trips up a lot of landlords. The IRS draws a line between repairs (deductible immediately) and improvements (depreciated over time).

Repair: Fixes something to its previous condition. Patching a roof leak, replacing a broken garbage disposal, repainting a room. Deduct the full amount in the year you paid it.
Improvement: Makes the property better, adapts it to a new use, or extends its life. New roof, new kitchen, adding a bathroom, new HVAC system. These get depreciated (usually over 27.5 years for residential).

Rule of thumb: if you're fixing or maintaining, it's a repair. If you're upgrading or adding, it's an improvement.

Depreciation

You can depreciate the building (not the land) over 27.5 years using straight-line depreciation. If you bought a property for $200,000 and the land is worth $40,000, you depreciate $160,000 over 27.5 years = $5,818/year.

You should take depreciation every year. If you don't, the IRS will "recapture" it when you sell the property anyway, meaning you'll owe tax on depreciation you never took. Always take it.

Common Mistakes

Not tracking expenses during the year. If you wait until April to dig through bank statements, you'll miss deductions. Track expenses as they happen.
Mixing personal and rental expenses. Keep rental finances separate. Use a dedicated bank account or a tool that separates them automatically.
Forgetting software subscriptions. Your property management software fee, your landlord app subscription, and similar costs are deductible under "Other expenses" (line 19).
Not deducting mortgage interest. Only the interest portion of your mortgage payment is deductible, not the principal. Your lender sends you a 1098 form with the interest amount.
Skipping depreciation. See above. Always take it.

How AnyRentCloud Makes Schedule E Easier

AnyRentCloud connects to your bank account via Stripe Financial Connections. Throughout the year, it imports your transactions and auto-categorizes them into Schedule E categories. Mortgage interest goes to line 12. Insurance goes to line 9. Repairs go to line 14.

Your rent income from Stripe is already tracked. At tax time, export a Schedule E report that has your income and categorized expenses for each property. Hand it to your accountant or use it to fill out the form yourself.

No more weekend-long bank statement reviews. No more guessing which category a payment belongs to.

Automate your Schedule E prep. Bank imports + auto-categorization + export.

Get started free or try the live demo