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.
Quick Access Tools
Frequently Asked Questions
What records should taxpayers keep to document capital gains and losses reported on Schedule D?
Taxpayers should retain brokerage statements, consolidated 1099 forms, purchase confirmations, sale confirmations, cost-basis records, improvement receipts for real property, and depreciation schedules for any assets subject to annual deductions. Alabama audits often focus on basis accuracy and verification of loss carryovers, so keeping documentation for both acquisition and sale is essential. For long-term holdings, records may go back many years and should be stored securely. Even when brokerage firms track basis, taxpayers bear ultimate responsibility for accuracy. Maintaining detailed records ensures clean reporting and reduces the risk of adjustments or disallowed losses during review.
Does sales or property tax affect this page?
This page models income/payroll taxes only; other taxes affect your budget, not paycheck math.
Where can I get help understanding complex allocation scenarios on AL-40NR?
Complex allocation issues—such as multi-state employment, remote work with periodic Alabama presence, cross-border business operations, or shared pass-through ownership—often require careful review to avoid over-reporting or under-reporting Alabama income. You can begin by exploring the detailed nonresident calculator at https://www.taxformcalculator.com/calculator/alabama/al-40nr.html, which helps you model income scenarios and validate your allocation percentages. This tool can be especially helpful for part-year movers who had pay originating in one state while performing duties in another. It also assists in identifying which adjustments and credits need to be prorated. For filers with pass-through entities, rental property, or substantial business activity, methodical use of the calculator can prevent errors that may otherwise lead to amended returns, delayed refunds, or Alabama Department of Revenue inquiries.
Why don’t my brackets match payroll tables?
Employers may use different rounding/timing tables; small variances are normal.
What documentation should taxpayers keep to support KRCC-I claims?
Taxpayers must retain the original Alabama Capital Credit certificate, pass-through K-1 statements showing their credit allocation, project approval letters from the Alabama Department of Commerce, prior-year KRCC-I schedules reflecting carryforward balances and the certified project number. Supporting documentation must demonstrate the taxpayer’s ownership interest for each period in which the credit is claimed. While Alabama does not require filing all documents with the return, the Department of Revenue can request them at any time, and incomplete documentation may result in a denied or reduced credit. These records should be retained for the full credit duration, as claims may span up to 20 years.
Important Notes
All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.