A Schedule E Tax Form is a tax schedule where someone who is either self-employed and owns a corporation or receives rental income reports his or her income. This form is used to report income or losses. A schedule E form does not only report income. You can also use it to report a net loss from a certain business activity. When engaging in an activity for profit, the IRS will limit deductibles to an amount in which you are now at risk.
When someone receives a K1 from their company, this is where the income reports on their individual tax return.
An underwriter is typically looking to see if you have a two-year average of receiving income from a Schedule E only about K1 income. Also, if a borrower has rental income, a two-year average is not usually required. There are exceptions to many of these guidelines.
An underwriter will also review all the tax deductions or expenses you claim on a rental property from the Schedule E. The days that the rental property is reported in use is also declared on this form.