Supplemental Income and Loss - Schedule E
Attach Schedule E to your 1040 to report income or loss from rental properties as well as royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs.
Owners of rental property can make filling out a Schedule E easier, and take better advantage of the tax breaks available to earners of rental income, by keeping detailed records of all rental property expenses.
Be sure to keep track of the purchase price of the rental property, its depreciation, rental income, and security deposits as well as the expenses associated with your rental income, including commissions, property management fees, advertising costs, cleaning, maintenance, repair, homeowners insurance, etc.
Note that the IRS considers earning rental income a passive activity. This means that the losses from your rental business that you can deduct are limited to $25,000 a year, though they can be carried over to a future year. Certain exceptions do apply.