Alabama Schedule E – Supplemental Income & Loss
Last reviewed: 2025-11-12
Use the Alabama Tax Form Calculator Form AL-40 Schedule E: Alabama Schedule E – Supplemental Income & Loss as a stand alone tax form calculator to quickly calculate specific amounts for your 2026 Alabama state tax return. Alternatively, you can use one of our Combined Federal and State Tax Estimators to quickly calculate your salary, tax, and take-home pay.
Schedule E is used by Alabama taxpayers to report supplemental income or loss such as rental real estate, royalties, partnerships, S corporations, estates, and trusts. The amounts you report here carry onto your Form 40 or Form 40NR, helping Alabama’s Department of Revenue determine your total taxable income.
Alabama generally adopts federal classifications for supplemental income and loss, but you must follow state-specific rules for basis, depreciation, and treatment of rental real estate or royalty income.
How to Complete Alabama Schedule E
- Part I – Rental & Royalty Income (or Loss): List each rental or royalty property with its address, ownership percentage, gross receipts or royalties, and deductible expenses such as depreciation, maintenance, taxes, interest, insurance and management fees.
- Part II – Income (or Loss) from Partnerships, S Corporations, Estates & Trusts: Report your share of income or loss shown on any Alabama Schedule K-1 or other pass-through entity statement; include name, FEIN, and type of income.
- Part III – Summary: Add together all supplemental income or loss from Parts I and II to calculate the net amount to carry to Form 40, page 2, Income from Schedules D & E.
- Documentation & Adjustments: Retain all K-1s, rental real-estate statements, royalty agreements and basis records. Alabama may require adjustments to federal deductions or basis values per state law.
- Attach Schedule E: When you file your return, attach this schedule along with any required statements or K-1s so the filing is complete.
| PART I – Income or Loss From Rental Real Estate and Royalties | ||||
| Property Description | Physical Address | Income | Expenses | |
| 1a | ||||
| 1b | ||||
| 1c | ||||
| 2 | Total Income | |||
| 3 | Total Expenses | |||
| 4 | Net Income (Loss) from Rental Real Estate and Royalties | |||
| PART II – Income or Loss From Partnerships and S Corporations | ||||
| Name | FEIN | Income | Loss | |
| 5a | ||||
| 5b | ||||
| 6 | Total Income from Partnerships/S Corps | |||
| 7 | Total Loss from Partnerships/S Corps | |||
| 8 | Net Income (Loss) from Partnerships/S Corps | |||
| PART III – Income or Loss From Estates and Trusts | ||||
| Name | FEIN | Income | Loss | |
| 9a | ||||
| 9b | ||||
| 10 | Total Income from Estates/Trusts | |||
| 11 | Total Loss from Estates/Trusts | |||
| 12 | Net Income (Loss) from Estates/Trusts | |||
| PART IV – Summary | ||||
| 13 | Net Income (Loss) from Part I | |||
| 14 | Net Income (Loss) from Part II | |||
| 15 | Net Income (Loss) from Part III | |||
| 16 | Total Supplemental Income (Loss) (sum lines 13–15). Enter on Form 40, line 9 or 40NR, line 10 | |||
Example Scenarios
Example 1 – Rental Property: You own an apartment building and report gross rent of $18,000 with total allowable expenses of $14,500. Your net rental income of $3,500 is entered in Part I and carried to Form 40.
Example 2 – Pass-Through Income: You received a Schedule K-1 from a partnership showing $7,200 ordinary business income. You enter this in Part II along with the entity’s name and FEIN, then sum the Part I and Part II entries to arrive at the amount carried to Form 40.
Example 3 – Loss Situation: If your rental activity shows a net loss of $1,200 and your K-1 shows income of $4,000, you would carry the net supplemental income of $2,800 to Form 40.
Last reviewed: 2025-11-12: If you believe this form requires an update, please contact us.
Further Guidance & Resources
- Form AL-40 – Individual Income Tax Return
- Form AL-40 Schedule D – Capital Gains & Losses
- Form AL-40 Schedule OC – Other Available Credits
- Alabama Department of Revenue – Individual Income Tax
Because supplemental income sources such as rentals, royalties, and pass-through entities often involve complex accounting rules, it is crucial to maintain clear records and follow Alabama-specific adjustments. Completing Schedule E accurately ensures proper reporting and may avoid delays in processing your return.
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Frequently Asked Questions
What happens if Form AL-40X shows that I owe additional Alabama tax?
If your amended return results in a higher tax liability, you should pay the additional amount when you file AL-40X. Interest on underpaid tax generally accrues from the original due date of the return, not the date you amend, so delaying payment only increases the final cost. If you are mailing a check, Alabama recommends using a payment voucher such as Form AL-40V or AL-40NRV, depending on whether you are a resident or nonresident, so that your payment is correctly tied to the amended year and account. Failure to settle the extra liability can lead to billing notices, further interest, and potential collection actions. Even so, voluntarily amending and paying usually results in a better outcome than waiting for Alabama or the IRS to discover discrepancies.
What records should parents keep to support a Schedule AATC claim?
Parents should retain invoices, tuition bills, proof of payment (bank statements, receipts), enrollment confirmations, and school documentation proving entry into the non-failing or nonpublic school. The Alabama Accountability Act requires strict substantiation to prevent misuse, so taxpayers should also keep the school’s classification documents or confirmation that the original school appeared on the “failing school” list for the appropriate year. If audited, the Alabama Department of Revenue may request these records to validate the refundable credit. While documents are not mailed with the return, they should be kept for at least three years.
How can I estimate my Alabama tax before using Form 40A?
You can preview your expected liability with the Alabama State Tax Calculator. It uses current rates, thresholds, and personal exemptions to show how much tax you’ll owe or be refunded. This is especially useful if you are switching from the full Form 40 or adjusting withholding.
Who must file Alabama Form AL-40NR and how does it differ from the resident Form AL-40?
Form AL-40NR is required for individuals who were not Alabama residents for the tax year, or who lived in the state only part-time, but earned income from Alabama sources. Unlike the resident Form AL-40, which reports all income from all sources, Form AL-40NR focuses on allocating income between Alabama and other jurisdictions. You must complete the return if you earned wages for work performed in Alabama, had rental property within the state, received income through a pass-through entity operating in Alabama, or sold property located in Alabama. Part-year residents must report income earned while domiciled in the state and any income sourced to Alabama thereafter. The AL-40NR also requires an allocation schedule to separate Alabama-sourced income from non-Alabama income, ensuring the correct proportion of tax is calculated. This prevents nonresidents from overpaying on non-Alabama income while still ensuring Alabama collects the correct amount on in-state activity.
Why don’t my brackets match payroll tables?
Employers may use different rounding/timing tables; small variances are normal.
Important Notes
All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.