Form 8825: Rental Real Estate Income and Expenses of a Partnership or an S Corporation
Used by partnerships and S corporations to report income and deductible expenses from rental real estate activities.
Overview
IRS Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, is the dedicated schedule that partnerships (filing Form 1065) and S corporations (filing Form 1120-S) use to separately report income and deductible expenses from rental real estate activities. The form provides a property-by-property income statement that rolls up into a single net income or loss figure, which then flows to Schedule K and ultimately to each partner's or shareholder's Schedule K-1. Because rental real estate is treated as a passive activity under IRC §469 for most partners and shareholders, segregating these amounts on Form 8825 is essential for proper passive activity loss tracking at the individual level.
The form's structure mirrors what a sole proprietor would report on Schedule E, but it is specifically designed for flow-through entities. Up to eight properties can be reported on a single Form 8825; additional forms may be attached when an entity owns more properties. Each property gets its own column for gross rents and each category of deductible expense, making it straightforward to trace income and losses back to a specific asset during an audit or a tax planning discussion.
From a compliance standpoint, Form 8825 is not filed separately — it is an attachment to the entity return and shares the same filing deadline and extension rules. The net rental real estate income or loss from all properties is carried to Form 1065 Schedule K (line 2) or Form 1120-S Schedule K (line 2), where it is allocated to partners or shareholders and reported on their respective Schedule K-1s. CPAs should pay close attention to depreciation computations, passive activity grouping elections, and the distinction between rental real estate activities and non-rental real estate activities, because misclassifying activities can distort passive loss limitations at the owner level.
Who Files This Form?
Any partnership required to file Form 1065 or any S corporation required to file Form 1120-S must attach Form 8825 if the entity has gross income, expenses, or a net loss from rental real estate activities during the tax year. There is no minimum income threshold — even a property that generated zero gross rent but incurred deductible carrying costs (e.g., property taxes, mortgage interest, depreciation) requires reporting on Form 8825.
The filing obligation extends to all rental real estate the entity holds, regardless of whether the activity produced a profit or a loss. This includes residential rental properties, commercial buildings, land leased for a rental fee, and any portion of a mixed-use property attributed to rental activity. It does not include rental activities that are not real estate — for example, equipment leasing is reported elsewhere (typically on Schedule K line 3 as 'other net rental income or loss').
Partnerships that hold rental real estate through tiered structures (e.g., a lower-tier partnership whose rental income flows to an upper-tier partnership) must still complete Form 8825 at each partnership level that directly holds the real property.
An important edge case involves properties placed in service during the year or disposed of mid-year: the form must still be completed for the partial period, and depreciation must be computed using the applicable convention (typically mid-month for residential and nonresidential real property under MACRS). Similarly, if an S corporation or partnership makes a §754 election, any §734(b) or §743(b) adjustments that affect depreciable real estate basis must be reflected in the depreciation line on Form 8825 for the affected properties.
Entities that elected out of the centralized partnership audit regime (CPAR) under §6221(b) should be aware that rental real estate adjustments surfaced on Form 8825 are still subject to audit at the entity level, even though the tax consequence flows to individual owners.
Key Fields
Property Address / Description (Column Header)
Each of the up to eight columns requires a street address or a descriptive identifier (e.g., 'vacant land – Dallas, TX') for the property. Accurate identification is critical because IRS examiners cross-reference addresses against county records and prior-year returns. If the entity owns more than eight properties, attach additional Form 8825 pages and consolidate the totals.
Gross Rents (Line 1)
Enter total rents received or accrued during the tax year for each property. This includes base rent, any separately billed operating expense reimbursements that the entity is contractually entitled to receive, and lease cancellation payments. Security deposits that are not applied to rent are not income; deposits that are forfeited or applied during the year are. Gross rents should match rent rolls and bank deposits — a common audit trigger is a significant variance between reported gross rents and 1099 income received.
Advertising (Line 2)
Deductible costs to advertise rental properties, such as online listing fees, signage, and print advertising. This line is straightforward but often understated; many entities omit advertising platform fees paid by credit card that don't generate a 1099.
Repairs (Line 5)
Only ordinary repairs and maintenance that do not materially add value or substantially prolong the life of the property belong here. Amounts that must be capitalized under the tangible property regulations (the 'repair regs' finalized in 2014) should instead be added to basis and depreciated. Misclassifying capital improvements as repairs is one of the most frequently adjusted items on rental real estate exams.
Taxes (Line 6)
Real property taxes assessed and paid (or accrued under the accrual method) are deductible here. Note that for C corporations the SALT cap does not apply, but for S corporations and partnerships the deductibility of state and local taxes at the entity level (versus the owner level) depends on whether the entity made a PTET election. Do not include federal income taxes or special assessments that increase property value.
Utilities (Line 9)
Electricity, water, gas, and similar utility costs paid by the entity on behalf of the rental property. If a utility is paid by a tenant under a net lease, it generally should not appear here; including tenant-paid utilities as both income and expense is an acceptable presentation only when the entity is technically the obligor on the utility account.
Depreciation Expense or Depletion (Line 14)
Enter depreciation from Form 4562 for each property. Residential rental real property uses a 27.5-year MACRS life; nonresidential real property uses 39 years (or 40 years under ADS). The mid-month convention applies in the year of acquisition and disposition. Bonus depreciation applies to qualified improvement property (QIP) at the applicable rate for the tax year, but the building structure itself is not eligible for bonus depreciation. Errors in recovery period or convention are among the most common depreciation mistakes on this form.
Other (Line 15)
A catch-all for deductible rental expenses not listed on a specific line, such as property management fees, landscaping, HOA dues, pest control, and casualty losses allowed under the applicable rules. When a single 'other' amount is large, best practice is to attach a supporting schedule itemizing the components to reduce audit risk.
Net Income (Loss) per Property (Lines 16 and 17)
Line 16 totals deductible expenses for each property; line 17 computes gross rents minus total expenses. Positive amounts are net income; amounts in parentheses are net losses. These column totals are aggregated and carried to Schedule K. Remember that this is the economic net income/loss before any passive activity limitation — the limitation itself is applied at the partner or shareholder level using Form 8582.
Total Net Income (Loss) — Summary Line
The combined net income or loss from all properties on all attached Form 8825 pages flows to Form 1065, Schedule K, line 2 (or Form 1120-S, Schedule K, line 2). This single figure is then allocated to each partner or shareholder per their profit-sharing ratio or special allocation and appears on Schedule K-1, Box 2. Verify that the amount on Schedule K agrees to the sum of all Form 8825 totals before filing.
Filing Deadlines
Filed with partnership or S corporation return
Filed with Form 1065 or 1120-S; subject to the same late filing penalties as the underlying return.
Step-by-Step Instructions
- 1
Gather supporting documents for each rental property: rent rolls or lease agreements, bank deposit records, invoices for repairs and maintenance, property tax bills, utility statements, insurance declarations, and the prior-year depreciation schedule from Form 4562.
- 2
Assign each property to a separate column on Form 8825. If the entity owns more than eight properties, prepare additional copies of the form. Enter the property address and indicate the type of property (e.g., residential, commercial, land) in the column header area.
- 3
Enter gross rents on line 1 for each property. Reconcile the total to rent rolls and any 1099s received. If the entity uses the accrual method, include rents earned but not yet collected; if cash method, include only amounts actually received.
- 4
Complete lines 2 through 15 for each allowable expense category. For the 'Other' line (line 15), attach a detail schedule if any single item exceeds a reasonable threshold (many firms use $1,000 or 5% of gross rents as a guide). Do not include personal expenses or expenses allocable to periods when a property was not available for rent.
- 5
Prepare or update Form 4562 for each property to determine the current-year depreciation deduction. Confirm the correct asset class, recovery period, and convention. If new property was placed in service during the year or if qualified improvement property was added, determine whether bonus depreciation applies and at what rate.
- 6
Enter depreciation from Form 4562 on line 14 for each property. If the entity has §179 expense, note that §179 is generally not available for rental real estate used in a passive activity — confirm the rules apply before including any §179 on this line.
- 7
Compute total expenses (line 16) and net income or loss (line 17) for each property column. Sum the column totals across all pages of Form 8825 to get the overall net rental real estate income or loss.
- 8
Transfer the total net income (loss) to Form 1065 Schedule K, line 2, or Form 1120-S Schedule K, line 2. Verify that the Schedule K amount matches the Form 8825 total exactly before finalizing the return.
- 9
Allocate the rental real estate income or loss to each partner or shareholder on Schedule K-1 (Box 2) according to the partnership agreement or S corporation pro-rata rules. Confirm that each K-1 recipient receives the information necessary to complete Form 8582 and determine their allowable passive activity loss.
Common Mistakes to Avoid
Misclassifying capital improvements as repairs on line 5, creating an improper current deduction.
Apply the tangible property regulations (the 'repair regs') to distinguish deductible repairs from capitalizable betterments, restorations, or adaptations. When in doubt, capitalize and depreciate, then document the reasoning in the workpapers.
Using the wrong depreciation recovery period — most often applying 39 years to residential rental property instead of 27.5 years, or vice versa.
Confirm the property type at the time of acquisition by reviewing the purchase agreement or lease agreements; residential rental property (80% or more of gross rent from dwelling units) uses 27.5 years under MACRS. Flag mixed-use properties for additional analysis.
Omitting partial-year depreciation for properties acquired or disposed of during the tax year, resulting in either an over- or under-deduction.
Real property uses the mid-month convention; ensure Form 4562 reflects the actual month placed in service or disposed of, and do not default to a half-year or full-year calculation.
Failing to attach a detail schedule for large 'Other' expense amounts on line 15, increasing audit exposure.
Whenever 'Other' expenses are material, include a labeled attachment itemizing each component. This is standard practice at most CPA firms and reduces IRS inquiry risk significantly.
Carrying the net rental real estate income or loss to the wrong line on Schedule K, confusing rental real estate income (Schedule K, line 2) with other rental income (Schedule K, line 3).
Form 8825 reports only rental real estate activities; non-real estate rental activities (e.g., equipment leasing) do not belong on Form 8825 and flow to a different Schedule K line. Review activity classification before mapping amounts to Schedule K.
Including security deposits as gross rent on line 1 before they have been applied or forfeited.
Security deposits held in trust that the entity is obligated to return are not income until applied to unpaid rent or forfeited. Track deposit status separately and recognize income only when the triggering event occurs.
Frequently Asked Questions
Form 8825 is used by partnerships and S corporations to report income and deductible expenses from rental real estate activities on a property-by-property basis. The net income or loss from all properties rolls up to Schedule K of the entity return and is then allocated to each partner or shareholder on Schedule K-1. It does not apply to individual landlords, who report rental activity on Schedule E of Form 1040.
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