Yes, you treat this as rental income on Schedule E.
Rent you receive from your tenant under the sublease is rental income and must be reported. If your tenant pays for expenses that you are obligated to pay pursuant to your lease, then you must treat the tenant's payment as income. You can deduct expenses related to the sublease to offset rental income. You can deduct the rent you pay to your landlord because it is an ordinary and necessary expense for you to rent the property. You can also deduct operating expenses, such as property maintenance you pay. Expenses related to damage caused by your tenant are also deductible. Receiving rental income requires you to report your income and expense using form 1040. You will generally use Schedule E of form 1040 to report your rental income and expenses. If you are in the business of renting property or investing in real estate, you'll also fill out Schedule C relating to profits or losses from a business. You may have to fill out state specific forms related to your rental properties.
Answers are correct to the best of my ability but do not constitute legal or tax advice.
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