Schedule E 2026: New Line 13a, Two Mileage Rates, What Changed

Schedule E is where a landlord reports rental real estate income and expenses, and where partners, S corporation shareholders and trust beneficiaries report what their Schedules K-1 pass through. For 2026, the changes are concentrated in Part I, the rental part, and they mirror the changes to Schedule C for 2026: a vehicle loan interest line and a mid-year change in the mileage rate.

The form, line by line

Comparing the 2025 Schedule E with the 2026 draft, these are the substantive differences:

Everything else, from rents on line 3 to the passive-loss lines and the partnership and S corporation tables in Part II, keeps its numbering. Lines 23a through 23e, the totals across all properties, still add up line 3, line 4, line 12, line 18 and line 20.

Line 6: auto and travel at two rates

Line 6 is where a landlord deducts driving to collect rent, show a unit, meet a contractor or buy supplies. The draft instructions now say: “multiply the number of miles driven in connection with your rental activities by 72.5 cents a mile from January 1, 2026, through June 30, 2026, and 76 cents a mile from July 1, 2026, through December 31, 2026. Include this amount and your parking fees and tolls on line 6.”

The rate changed because the IRS issued Announcement 2026-11 in July, citing higher fuel prices. The change applies to expenses paid or incurred on or after July 1, 2026.

A landlord with two single-family rentals who drove 800 rental miles from January to June and 1,000 from July to December deducts 800 × $0.725 = $580 plus 1,000 × $0.76 = $760, for $1,340 before parking and tolls. That figure has to be split across the properties on the line 6 columns in proportion to the driving each one caused, which is why a mileage log with dates and destinations matters more in 2026 than usual.

The usual conditions still apply: the standard rate is available only if you used it in the first year the vehicle was placed in service (or for the whole lease), and you must use actual expenses if you used more than four vehicles at the same time in your rental activities. With the standard rate, you cannot also deduct depreciation, lease payments or actual operating costs.

Line 13a: vehicle loan interest

The instructions for the new line say to enter “interest paid or accrued on debt incurred to purchase a vehicle used in your rental activity,” and only the share allocable to business use. As on Schedule C, the line applies “regardless of whether you use the business standard mileage rate method or the actual cost method.”

The same car can produce two deductions from one loan. The rental-use share goes on Schedule E, line 13a. The personal-use share may qualify for the car loan interest deduction on Schedule 1-A if the vehicle and loan meet that deduction’s tests, including a new vehicle whose final assembly was in the United States. The instructions are explicit that “if you claim a deduction on Schedule 1-A (Form 1040) for vehicle loan interest, then you can’t claim a deduction for that same interest on Schedule E.”

Using the same landlord: if the car was driven 18,000 miles in 2026, 1,800 of them for the rentals, rental use is 10 percent. With $3,000 of interest for the year on the lender’s statement or Form 1098-VLI, $300 goes on line 13a. The remaining $2,700 is personal and goes to Schedule 1-A only if it qualifies there.

The split follows actual use; it is not a choice. The instructions say to deduct only the business-use portion on Schedule E, and Schedule 1-A covers only the personal-use portion. What can differ is when the rental share pays off. A rental loss is usually passive, and passive losses beyond the special $25,000 allowance for active participants (which phases out between $100,000 and $150,000 of modified AGI) are suspended until you have passive income or sell the property. If your rental already shows a suspended loss, the $300 on line 13a adds to the amount carried forward rather than lowering this year’s tax.

Line 13b now holds what used to be on line 13: other interest related to the rental, including mortgage interest you paid on a loan where someone else received the Form 1098, and interest on credit card purchases for repairs and maintenance (but not for improvements, which are capitalized).

The 1099 question at the top of Part I

Line A asks whether you made any payments in 2026 that would require you to file Forms 1099. The draft instructions say the “information reporting threshold increased from $600 to $2,000 for certain payments made on or after January 1, 2026,” and point to the new Publication 1099, which replaces the old general instructions for information returns.

For a landlord, the most common 1099 is Form 1099-NEC for a contractor who is not a corporation. Under the old $600 threshold, paying a handyman $1,200 over the year meant filing one. For 2026, it does not. The deduction for the repair is unaffected either way. The threshold is indexed for inflation from 2027; see Form 1099-NEC for 2026 and 2027.

Depreciation and other changes

The rest of the What’s New list repeats changes from the 2025 law that now appear in the 2026 instructions:

• Bonus depreciation. The 100 percent special depreciation allowance “is now permanent for qualified property acquired and placed in service after January 19, 2025,” with details in the Form 4562 instructions and Notice 2026-11. The rental building itself is 27.5-year residential rental property and does not qualify, but items such as appliances or carpeting placed in service in the unit generally can.
• New Form 4562-B. Amortization of intangibles moves from Part VI of Form 4562 to a separate Form 4562-B.
• Section 179D. The energy efficient commercial buildings deduction ends for property whose construction begins after June 30, 2026, the test in the statute and in the IRS FAQ on the 2025 law. The draft Schedule E instructions word it differently, as costs incurred and property placed in service by June 30, 2026; check the final instructions and Form 7205 before relying on either reading.
• Qualified business income deduction. It is permanent for tax years beginning after 2025. A rental that rises to the level of a trade or business can still qualify; see the QBI deduction on Form 8995.
• Gambling losses. They are now limited to 90 percent of losses and to gambling winnings, for the rare Schedule E filer it affects.

What to do before filing

1. Split rental miles at July 1. Total the miles for each property before and after that date.
2. Allocate the vehicle loan interest. Use the year’s interest and your rental-use percentage for line 13a, and decide whether the personal share qualifies for Schedule 1-A.
3. Check your 1099 list against $2,000. Only contractors paid $2,000 or more in 2026 need a Form 1099-NEC for those payments.
4. Check the passive loss limits. If the rental shows a loss you cannot use this year, the line 13a deduction is carried forward with the rest of the suspended loss, not lost.

Sources

• Internal Revenue Service — Draft Instructions for Schedule E (Form 1040) (2026), dated September 21, 2026: What’s New, Line 6, Lines 13a and 13b
• Internal Revenue Service — Draft Schedule E (Form 1040) (2026) and Schedule E (Form 1040) (2025)
• Internal Revenue Service — Internal Revenue Bulletin 2026-29, Announcement 2026-11 (revised standard mileage rates from July 1, 2026)
• Legal Information Institute, Cornell Law School — 26 U.S.C. 469, subsection (i), the $25,000 allowance for rental real estate with active participation