Taxes For Dummies

Chapter 15

Supplemental Income and Loss: Schedule E

IN THIS CHAPTER

Defining supplemental income

Completing Schedule E

Discussing tax shelters

Don’t let the words supplemental income throw you. That’s just IRS-speak for the income you receive from rental property or royalties, or through partnerships, S Corporations (Corporations that don’t pay tax; the owners report the Corporations’ income or loss on their personal tax returns), trusts, and estates. To report your rental or royalty income, you use Schedule E, which is laid out in the form of a profit or loss statement (income and expenses). From your income, you subtract your expenses. The remainder is your net income, the income that you have to pay taxes on. If you have a loss, the rules get a little sticky as to whether you can deduct it. (Isn’t that a surprise?) For partnerships, S Corporations, and trusts and estates, you’re going to flip Schedule E onto page 2 and report ordinary income or loss and rental income or loss in Part II for partnerships and S Corporations, and in Part III for estates and trusts.

Remember that ...