Schedule C Vs. Schedule E for Rental Income

Schedule C and Schedule E are both tax forms used for reporting rental income. They differentiate in the types of rental income included on each form.

Purpose

Both Schedule C and E are used for reporting rental income. Rental income is reported to enable the Internal Revenue Service (IRS) to assess taxes on the income. Rental income comes from many sources including the rental of property and land, and personal property.

Differences

Schedule C is a form used for reporting income subject to self-employment taxes. Any income earned where self-employment taxes must be paid is included on form Schedule C. Income not subject to self-employment tax is included on a Schedule E form, such as income earned through a business name.

Types

Personal property rental income, like machinery or equipment, is Schedule C. Income on a Schedule C is income earned through operating a business where the owner includes income on their personal tax return. Real estate rental income, not subject to self-employment taxes, goes on Schedule E. This occurs when real-estate income is earned for a business name. Royalty income is typically included on a Schedule E form unless the person is self-employed.

References

• IRS: Passive Activity Loss ATG - Chapter 3, Passive Income
• IRS: 2009 Instructions for Schedule E (Form 1040)
• H&R Block: Tax Tips and Calculators
• J.K. Lasser: Income from Rents and Royalties