Type of Property - Schedule E

When reporting rental income and expenses on Schedule E, you'll be asked to identify the type of property you own. The property type helps determine whether the rental activity is subject to special tax rules, including passive activity limitations, depreciation rules, and self-rental provisions.

The property types that commonly require special attention are:

Select Land if the income you're reporting is from renting or leasing land rather than a building or other depreciable property.

A key tax rule to remember is that land cannot be depreciated. Unlike residential or commercial buildings, land does not wear out, become obsolete, or have a determinable useful life for tax purposes. As a result, depreciation deductions are not allowed for the value of the land itself.

If you're reporting rental income from land, review the IRS guidance on the special tax treatment of non-depreciable property to determine how the activity should be reported.

Select Self-Rental if you rent property to a trade or business in which you materially participate.

For example, if you personally own a building and lease it to your own business, the activity may be considered a self-rental. Self-rental activities are subject to special passive activity rules. In certain situations, rental income from a self-rental arrangement may be treated as nonpassive income, even though rental activities are generally considered passive. Because these rules can affect how income and losses are treated, it's important to properly identify self-rental activities when completing Schedule E.

Select Other (8) only if the property doesn't fit into any of the standard property categories available on Schedule E.

This option is not commonly used. When Other is selected: