Pennsylvania PA Schedule E - Rent and Royalty Income (Loss)

PA Schedule E - Rent and Royalty Income (Loss)
2023 PA Schedule E - Rent and Royalty Income (Loss) (PA-20S/PA-65 E)
IMPORTANT: FILL IN FORM MUST BE DOWNLOADED ONTO YOUR COMPUTER PRIOR TO COMPLETING
2306810058

PA SCHEDULE E
Rent and Royalty
Income (Loss)

PA-20S/PA-65 E (DR) MOD 04-23 (FI)
PA Department of Revenue

START

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2023

OFFICIAL USE ONLY

Copy PA-20S/PA-65 Schedule E to list additional properties.
Name as shown on the PA-20S/PA-65 Information Return

FEIN 9 DIGIT - NO DASH

SECTION I. Property Description Enter the address and type of each rental property and/or each source of royalty income. If the property is outside PA, fill in the oval.
A
B
C
D

SECTION II. (Enter amounts in whole dollars)
Income (As reported on federal Form 8825)

Property A

Property B

Property C

Property D

1 Rental income received . . . . . . . . . . . . . . 1
2 Royalty income received . . . . . . . . . . . . . 2
Expenses (As reported on federal Form 8825)

¢
¢
¢
¢
¢

3
4
5
6
7
8
9
10
11
12
13
14
15

Automobile and travel . . . . . . . . . . . . . . .
Commissions . . . . . . . . . . . . . . . . . . . . .
Legal and professional fees . . . . . . . . . . .
Repairs . . . . . . . . . . . . . . . . . . . . . . . . .
Management fees . . . . . . . . . . . . . . . . . .

¢
¢
¢
¢
¢

3
4
5
6
7

Advertising . . . . . . . . . . . . . . . . . . . . . . 8
Cleaning and maintenance . . . . . . . . . . . 9
Insurance . . . . . . . . . . . . . . . . . . . . . . .10
Interest . . . . . . . . . . . . . . . . . . . . . . . . .11
Taxes (not based on net income) . . . . . . .12
Utilities . . . . . . . . . . . . . . . . . . . . . . . . .13
Wages and salaries . . . . . . . . . . . . . . . .14
Depreciation expense . . . . . . . . . . . . . . .15

Important. PA PIT law does not permit any federal bonus depreciation.
16 Other expenses (itemize): . . . . . . . . . . . .16
................................
................................
................................
17 Total Expenses for Each Property –
Add Lines 3 through 16. . . . . . . . . . . . . .17
Income or Loss
18 Income – If Line 1 or 2 is greater than
Line 17. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
19 Loss – If Line 1 or 2 is less than Line 17.
(fill in the oval). . . . . . . . . . . . . . . . . . . .19
20 Income (loss) from property within Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(If loss, fill in oval)
21
22
23
24

Income (loss) from property outside Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(If loss, fill in oval)
Rent or royalty income (loss) from PA sources from PA Schedule(s) NRK-1. . . . . . . . . . . . . . . . . . . . . . .(If loss, fill in oval)
Rent or royalty income (loss) from sources outside PA from PA Schedule(s) RK-1 and NRK-1. . . . . . . . . . .(If loss, fill in oval)
Net rent and royalty income (loss) from PA sources. Add Lines 20 and 22. . . . . . . . . . . . . . . . . . . . . .(If loss, fill in oval)

25 Net rent and royalty income (loss) from outside Pennsylvania. Add Lines 21 and 23. . . . . . . . . . . . . . . . . .(If loss, fill in oval)

LOSS
LOSS
LOSS
LOSS
LOSS
LOSS

20
21
22
23
24
25

Note: Net gain (loss) from federal Form 4797, from the disposition of property from rental real estate activities must be reported on
PA-20S/PA-65 Schedule D.

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2023
Instructions for PA-20S/PA 65 Schedule E
PA-20S/PA-65 E IN (DR) 04-23

Rent and Royalty Income (Loss)

WHAT’S NEW

ALLOWABLE DEDUCTIONS

Line 16 Other expenses may be affected by changes in regard to IRC §179 deduction limitations. See IMPORTANT
under Allowable Deductions for more information.

The PA S corporation or partnership may only deduct the expenses that it ordinarily pays or incurs during the taxable
year. The expenses must be necessary for the production
or collection of rent and royalty income or the management,
conservation or maintenance of rents, royalties, patents,
copyrights or similar property. Such expenses include advertising, cleaning and maintenance, agents’ commissions,
insurance, legal fees, management fees, interest, repairs,
supplies, utilities, and depreciation expense or cost depletion. Refer to 61 Pa. Code § 125.51 for cost depletion.

GENERAL INFORMATION
PURPOSE OF SCHEDULE
Use PA-20S/PA-65 Schedule E to report income (loss) from
rent and royalty income of PA S corporations, partnerships
and LLC’s filing as S corporations and partnerships for federal income tax purposes.
Pennsylvania does not follow federal At-Risk Rules or Passive Activity Loss Rules.

NET INCOME (LOSS) FROM RENTS,
ROYALTIES, PATENTS AND COPYRIGHTS
Gross rent and royalty income includes all items of gross income or receipts derived from rents, royalties, patents, copyrights, secret processes, formulas, goodwill, trademarks,
trade brands, franchises and similar property, except:
● Income or receipts derived from the sale, exchange or
other disposition of rents, royalties, patents, secret
processes, formulas, goodwill, trademarks, trade
brands, franchises and similar property; or
● Income or receipts derived from operating oil, gas, or
mining interests includable in the calculation of net profit
(loss) from a business, profession or farm, or otherwise
derived in the ordinary course of and from the operation
of a business.
NET RENT
Net rents and royalties from real and tangible personal property located in Pennsylvania are allocable to Pennsylvania.
NET ROYALTIES
Patent, copyright and other intangible royalties are allocable
to Pennsylvania to the extent that the payer of such income
uses the patent or copyright in Pennsylvania.
A business uses a patent in Pennsylvania to the extent that
it employs the patent in the production, fabrication, manufacturing, or other processing in Pennsylvania, or to the extent that it produces a patented product in Pennsylvania.
A business uses a copyright in Pennsylvania to the extent
that it prints or otherwise publishes in Pennsylvania.

IMPORTANT: Pennsylvania personal income tax law
does not conform to federal law allowing bonus depreciation expense elections. Effective January 1, 2023 Pennsylvania personal income tax law conforms to the federal
IRC §179 limitations in regards to the IRC §179 deduction
and total purchase limit of eligible IRC §179 property. Note,
if you have income/loss from more than one business, profession or farm you may not deduct more than the IRC §179
deduction and the IRC §179 deduction is phased out when
aggregate eligible purchases exceeds federal limits.
You do not need to expense assets using IRC §179
on your federal return in order to claim the expense
on your PA return.

RENT VS. NET BUSINESS INCOME
The determination of whether rent and royalty income is reported on PA-20S/PA-65 Schedule E or PA-20S/PA-65
Schedule M, Column (b) is dependent upon the classification
of such income. Whether an activity is a passive activity for
federal income tax purposes is not controlling. Refer to the
PA Personal Income Tax Guide – Net Income (Loss) from
Rents, Royalties, Copyrights and Patents for the detailed
rules used in classifying rent and royalty income and net
business income.
All requisite Pennsylvania/federal differences are used in arriving at net rent and royalty income. Refer to the PA20S/PA-65 Schedule M for similar Pennsylvania/federal
differences.
PA RENTAL PROPERTY
If selecting Column (f) on PA-20S/PA-65 Schedule M, Part
II, Section I, then transfer the amount in Part II, Section VII,
Line 1 to the PA-20S/PA-65 Information Return, Section III,
Line 6b. If a loss, fill in the oval.

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NON PA RENTAL PROPERTY
If selecting Column (f) on PA-20S/PA-65 Schedule M, Part
II, Section I, then transfer the amount in Part II, Section VII,
Line 2 minus Line 1 to the PA-20S/PA-65 Information Return,
Section III, Line 6a. If Line 6a is a negative amount, fill in the
“loss” oval.

COMPLETING PA SCHEDULE E
Copy PA-20S/PA-65 Schedule E to list additional properties.
BUSINESS NAME
Enter the complete name of the entity or business as shown
on the PA-20S/PA-65 Information Return.
FEIN
Enter the nine-digit federal employer identification number
(FEIN) of the entity or business as shown on the PA-20S/
PA-65 Information Return.
NOTE: If there are more than four rental properties on
Schedule E constituting more than one page, then all
totals should appear on the first page of the schedule.

Complete PA-20S/PA-65 Schedule M, Part II to reflect your
Pennsylvania adjustments.
PROPERTY A, B, C, D
Enter amounts in whole dollars under the corresponding column of the property listed in Section I.
NOTE: Rental income may not be apportioned. It must
be allocated based on expenses and income. Complete Section II using actual amounts.

LINE 1
RENTAL INCOME RECEIVED
Enter the gross rent from the rental of real estate or other
tangible personal property, including personal property
leased with real estate. Include income received for renting
a room or other space. If you received services or property
as rent, report the fair market value of such services or property as rental income. Reporting of rental income should be
done separately from royalties using different columns on
Schedule E.

LINE INSTRUCTIONS
SECTION I
PROPERTY DESCRIPTION
Complete and submit a PA Schedule E. The PA Schedule E
should reflect what is reported on federal Form 8825, Rental
Real Estate Income and Expenses of a Partnership or S
Corporation.
For each rental real estate property (e.g., townhouse) and/or
royalty income (e.g., mineral extracts), enter street address,
city or town, and state and the type of property. The type of
property MUST be specified as described on federal Form
8825 codes. Single Family Residence multi family residence
Vacation, Commercial, Land, Royalties. If the property is outside Pennsylvania, fill in the oval.
Properties should not have the same address AND must be
clearly identified as to property description and Lot #, Apt. #
or Unit #.
NOTE: The address must be specific for each property
listed in Section I. If a multi-unit rental property, the address must include Unit/Apt for each unit. Example: Apt A or
Unit 1201.
Complete PA Schedule M, Part II to reflect your Pennsylvania
adjustments.

SECTION II
INCOME
PA-20S/PA-65 Schedule E should reflect what is reported
on federal Form 8825, Rental Real Estate Income and Expenses of a Partnership or S Corporation. Enter rental and
royalty income for each property as reported on federal
Form 8825.
2

LINE 2
ROYALTY INCOME RECEIVED
Enter the gross royalties from oil, gas or mineral properties
(not including operating interests), copyrights and patents.
Reporting of royalties should be done separately from rental
income using different columns on Schedule E.
EXPENSES
Enter rental and royalty expenses for each property as reported on federal Form 8825.

LINE 3
AUTOMOBILE AND TRAVEL
Deduct ordinary and necessary automobile and travel expenses related to your rental activities. You generally can either deduct your actual expenses or take the standard
federal mileage rate.

LINE 4
COMMISSIONS
Enter commissions paid during the current tax year.

LINE 5
LEGAL AND PROFESSIONAL FEES
Enter fees for tax advice and the preparation of tax forms related to your rental real estate or royalty properties. Do not
deduct legal fees paid or incurred to defend or protect title
to property, to recover property or to develop or improve
property. Instead, you must capitalize these fees and add
them to the property’s basis.

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LINE 6
REPAIRS
Enter the cost of repairs paid to keep your property in good
working condition. Repairs such as fixing a broken lock or
painting a room generally do not add significant value to the
property or extend its life. Improvements that increase the
value of the property or extend its life such as replacing a
roof or renovating a kitchen must be capitalized. You cannot
deduct such costs in full in the year it is paid or incurred.

LINE 7
MANAGEMENT FEES
Enter fees paid to an outside source by the entity to manage
property during the current year.

LINE 8
ADVERTISING
Enter the cost of advertising property vacancies during the
current tax year.

LINE 9
CLEANING AND MAINTENANCE
Enter fees related to cleaning and maintenance of property
performed by an outside source during the current tax year.

LINE 10
INSURANCE
Enter the cost of insurance for property during the current
tax year.

LINE 11
INTEREST
Enter the amount of interest paid to banks or other financial
institutions if you have a mortgage on your rental property.
To determine the interest expense allocable to your rental
activities, you must have records to show how you used the
proceeds of each loan. Pennsylvania does not follow federal
rules regarding prepaid interest.
NOTE: The federal limit on interest expense
under IRC §163(j) is not used for Pennsylvania
personal income tax purposes. Valid business interest
is fully deductible when calculating taxable income.
https://www.revenue.pa.gov/TaxLawPoliciesBulletinsNotices/
Pages/Tax-Cuts-Jobs-Act-2017.aspx

LINE 12
TAXES (NOT BASED ON NET INCOME)
Enter taxes paid directly related to the rental activity. Deduct
the proportionate share of real estate taxes. You may not
deduct taxes based on income. You may deduct gross receipts and business privilege taxes.

NOTE: The portion of the Philadelphia business privilege tax based on gross receipts is deductible for
Pennsylvania personal income tax purposes.

LINE 13
UTILITIES
Enter the cost paid for ordinary and necessary telephone
calls related to your rental activities or royalty income (for
example, calls to the renter). However, the base rate (including taxes and other charges) for telephone service for the
first telephone line into your residence is a personal expense
and is not deductible.

LINE 14
WAGES AND SALARIES
Enter wages and salaries related to property during the current tax year.

LINE 15
DEPRECIATION EXPENSES
Enter the annual depreciation deduction you must take to
recover the cost or other basis of business or investment
property having a useful life substantially beyond the tax
year. Land is not depreciable. Pennsylvania law does not
conform to Federal law to allow federal bonus depreciation,
you must adjust depreciation expense on Schedule M, Part
II. Note, an adjustment for depreciation expense and/or IRC
§179 deduction may be required based upon the treatment
of the assets if they differ from federal to Pennsylvania for
tax purposes. For assets where basis is different between
federal and PA, you must calculate depreciation expenses
on a straight line basis.
You do not need to expense assets using IRC §179
on your federal return in order to claim the expense on
your PA return.

LINE 16
OTHER EXPENSES
Enter other expenses not listed on Lines 3 through 15. If additional space is needed submit an itemized statement indicating the other expenses for each of the properties listed.

LINE 17
TOTAL EXPENSES FOR EACH PROPERTY
Add Lines 3 through 16.
INCOME OR LOSS
NOTE: Enter the income or loss on Line 18 or Line 19
for each property.

LINE 18
INCOME – IF LINE 1 OR 2 IS GREATER THAN LINE 17
Subtract Line 17 from the sum of Line 1 and Line 2.

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LINE 19

LINE 23

LOSS - IF LINE 1 OR 2 IS LESS THAN LINE 17
Subtract Line 17 from the sum of Line 1 and Line 2. Fill in
the oval.

RENT OR ROYALTY INCOME (LOSS) FROM SOURCES
OUTSIDE PENNSYLVANIA FROM PA SCHEDULE(S)
RK-1 AND NRK-1
Enter the rent and royalty income (loss) difference of PA20S/PA-65 Schedule(s) RK-1, Line 5 and PA-20S/PA-65
Schedule(s) NRK-1, Line 3. If a loss, fill in the oval.

LINE 20
INCOME (LOSS) FROM PROPERTY WITHIN
PENNSYLVANIA
Add the net income (loss) amounts from Lines 18 and 19 for
each property within Pennsylvania. If a loss, fill in the oval.

LINE 21
INCOME (LOSS) FROM PROPERTY OUTSIDE
PENNSYLVANIA
Add the net income (loss) amounts from Lines 18 and 19 for
each property outside Pennsylvania. If a loss, fill in the oval.

LINE 22
RENT OR ROYALTY INCOME (LOSS) FROM PENNSYLVANIA SOURCES FROM PA SCHEDULE(S) NRK-1
Enter the rent and royalty income (loss) amounts from PA-20S/
PA-65 Schedule NRK-1, Line 3. If a loss, fill in the oval.

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LINE 24
NET RENT AND ROYALTY INCOME (LOSS) FROM
PENNSYLVANIA-SOURCES
Add Lines 20 and 22. If a loss, fill in the oval.

LINE 25
NET RENT AND ROYALTY INCOME (LOSS) FROM
OUTSIDE PENNSYLVANIA
Add Lines 21 and 23. If a loss, fill in the oval.
Net gain (loss) from federal Form 4797, from the disposition of property from rental real estate activities
must be reported on PA-20S/PA-65 Schedule D.

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