Schedule E line 18: depreciation expense or depletion. Report the current-year recovery of capitalized rental assets, generally supported by Form 4562 and a property-by-property depreciation schedule.
Schedule E Part I is a classification form. The total matters, but so does the line because each property gets its own column and the named lines tell a preparer what kind of cost produced the result. The 2025 Instructions for Schedule E are the controlling map for this walkthrough.
What belongs on Schedule E line 18
Include depreciation for the residential building, capital improvements, appliances, carpet, equipment, fences, driveways, and other depreciable rental assets. Royalty property may have depletion on this line.
Use the gross amount before netting reimbursements, processor fees, or unrelated costs unless the form instructions specifically call for a net figure. Keep each property tagged from the day the transaction is entered. A portfolio total without property detail cannot rebuild the columns on Part I.
What does not belong here
Do not depreciate land, mortgage principal, refundable deposits, current repairs, or the full purchase price without removing land. Do not put an improvement's full cost on line 18; line 18 receives only the year's allowed deduction.
Capital improvements do not become current expenses by choosing an operating line. IRS Publication 946, chapter 1, requires capitalization for a betterment, adaptation, or restoration. Those costs go to an asset schedule and reach Schedule E through line 18 depreciation. A repair that merely keeps existing property working can stay current, usually on line 14.
The most common mistake
The common mistake is leaving line 18 blank because depreciation feels optional. Basis is reduced by depreciation allowed or allowable, so skipping it can lose the current deduction without avoiding later section 1250 recapture.
Do not force a number onto the form because a category name sounds close. Keep the receipt description and facts, then use the line the 2025 instructions name. Line 19 is for valid other rental expenses, not a holding pen for mortgage principal, personal costs, land, or capital work.
A worked Part I example
A rental has $275,000 building basis, a $3,000 appliance, and a $15,000 driveway. The building uses 27.5-year mid-month straight line, the appliance generally uses 5 years, and the driveway generally uses 15 years. Line 18 is the sum of each asset's 2025 deduction, not $293,000.
The example is a classification exercise, not a promise that the whole resulting loss is usable this year. IRS Publication 925 generally treats rental activity as passive. The active-participation special allowance can permit up to $25,000 of loss against nonpassive income, with the allowance phasing out as modified adjusted gross income moves from $100,000 to $150,000.
Personal use, recovery periods, and records
Residential buildings and structural components generally use 27.5-year straight-line MACRS with the mid-month convention. Common shorter classes are 5 years for appliances and carpet and 15 years for land improvements. Bonus eligibility depends on asset and acquisition timing.
Mixed use adds another limit. Under Publication 527, shared costs are divided between rental and personal use. If personal use exceeds the greater of 14 days or 10% of fair-rental days, the dwelling is treated as a home and rental deductions can be limited. The personal share does not move to another Schedule E line.
Keep permanent building-land basis, closing documents, improvement invoices, asset class, method, convention, in-service date, business use, Form 4562, dispositions, and every annual depreciation schedule.
The full Schedule E walkthrough shows how the Part I lines assemble. The expense-by-expense deduction library handles the classification behind each receipt. rents.ai keeps the same per-property line order as expenses are logged and computes residential 27.5-year mid-month depreciation for line 18, with no bank login required.
This is general information for preparing 2025 records, not tax advice. Schedule E can feed Form 8582, Form 4562, Form 4684, or other forms depending on the facts. Give your CPA the source records and let them make the filing decisions for your return.