Two of our most popular reports, the Net Income reports and Schedule E report tend to have some overlap; yet there are distinctive differences that are important to note.
This article serves as an overview guide to the similarities and differences of the Net Income reports and the Schedule E report.
The Schedule E Report
The Schedule E is locked to the property level as the IRS requires this is filed for the scope of one property. This means there is no Schedule E by Portfolio, Sub-Portfolio, or Unit as you file Schedule E on a property-by-property basis.
Additionally, it only shows the totals for the default expense accounts and Rent. The expense account totals are inclusive of any sub-accounts, and all default revenue accounts are included in Rent.
Any new parent-level expense or revenue account (not a sub-account of a default) is excluded from the Schedule E. Read more about creating sub-accounts in the chart of accounts here.
This report offers the option to automatically prorate portfolio-level expenses (transactions with no property selected) across all the properties in your portfolio and include mileage deductions from trips entered in the Mileage Log.
The Net Income Reports
The Net Income reports are multi-level; you can view Net Income reports by Portfolio, Sub-Portfolio, Property, and Unit.
These reports show all account totals and subtotals for all revenue and expense accounts (with a non-zero total). This includes showing any new parent-level accounts and their subaccounts.
For revenue or expenses not applied to a specific property, these reports include a separate column for None Assigned in the Net Income by Property or Net Income by Sub-Portfolio reports. They are not prorated out in the Net Income reports as they are in the Schedule E report, but are instead shown in a column of their own.
Lastly, the Net Income reports do not reflect mileage deductions from trips entered into the Mileage Log, as they are tax-specific operational deductions, not financial transactions.
Neither Report Shows
Loan principal paydown, but both will reflect mortgage interest expenses. REI Hub has an automatic mortgage interest expense account that populates when loan payments are booked.
Escrow transfers will not be reflected in either report. Instead, only actual expenses for property taxes and insurance will be included when they are manually entered in REI Hub. Read more about booking your annual expenses from escrow here.
Neither the Schedule E nor the Net Income reports will include asset purchases, including new properties or capital expenditures. These are not considered expenses as they are not immediately deductible in the same tax year but have long-term deductible depreciation.
Lastly, neither report will show transfers between accounts, owner distributions, or owner contributions. These don't count as revenue received or expenses incurred; these transactions are simply showing money moving from one place to another.
So, if you don't drive for your properties, book every expense to an individual property, and use the default chart of accounts, a property's Schedule E and Net Income report will be the same.
The two reports will differ if you record trips in the Mileage Log, use portfolio-level or sub-portfolio-level transactions, or create and use additional parent revenue and expense accounts (not sub-accounts of the defaults).
Both reports are included in the tax packet export to download and easily send to a CPA or tax preparer.
Still have questions? Reach out to our Support Team via email at [email protected] or call us at (888)939-6865.