My very limited understanding of rental property taxation includes the concept that we are definitely not a "business"
Your understanding is a bit skewed. it's both a business and an investment. Think of your rental property as a "business investment." You probably think otherwise because your rental stuff is reported on SCH E instead of SCH C. There's a reason for that.
SCH C income (which you already know is for a business with a single owner) is "earned" income. This means you actually go out an "do something", usually on a recurring basis to actually earn that income. With earned income, it's subject to regular taxes, as well as the additional 15.3% self-employement tax. The SE tax is basically the employer's share of the Medicare tax and contributions to your social security account. This income counts towards what you may qualify to receive in social security when you reach retirement age. Additionally, this income can be included when figuring your maximum allowed retirement contributions to a 401(k), IRA, or other tax deferred retirement account each year.
SCH E income, which is another "type" of business income, is called passive income. You don't actually go out and do anything to "earn" this income. All you do is "sit there" and collect it every pay period. This type of income is also subject to the regular income tax. However, it is not subject to the additional 15.3% self-employment tax. This money can not be used to figure your maximum allowed contributions to a tax deferred retirement account, and it also doesn't count when figuring the amount of social security you may qualify for when you reach retirement age. The two types of passive income reported on SCH E are rental income, as well as royalty income.
There are also other types of passive income one can receive. But they get reported elsewhere. One example would be the interest income you receive on your savings account from your bank each year.
