IRS Form 8825 Instructions: Line-by-Line for Partnerships and S Corps

Every partnership and S corporation that owns rental real estate uses Form 8825 to report property-level rents and expenses before the net result flows to each owner’s Schedule K-1. These Form 8825 instructions walk through the December 2025 revision line by line, cover what belongs on each line, and explain where the final number goes on Form 1065 or Form 1120-S.¹

Who Files Form 8825

Form 8825 is required for any partnership filing Form 1065 or any S corporation filing Form 1120-S that earns rental income from real property it owns.² Apartments, single-family rentals, commercial office space, warehouses, and ground-leased raw land all belong on the form. LLCs taxed as partnerships or S corporations after filing Form 8832 or Form 2553 file it too.³

One boundary worth noting up front: single-member LLCs treated as disregarded entities do not use Form 8825. Their rental income goes on Schedule E of the owner’s Form 1040.⁴

What Counts as a Rental Real Estate Activity

A rental activity is one where tenants pay primarily for the use of tangible property.⁵ Standard residential leases and commercial tenancies where the occupant uses the space for weeks or months are the clearest example, and they belong on Form 8825.

Two situations pull an operation off Form 8825. If the average period of customer use is seven days or less, the IRS treats it as an ordinary trade or business rather than a rental. So does an average customer stay of 30 days or less combined with significant personal services like daily housekeeping, concierge service, or prepared meals.⁶ Those operations get reported as ordinary business income on page 1 of Form 1065 or Form 1120-S.

The line between routine building services and significant personal services matters. Heat, cleaning common hallways, and trash removal are ordinary and don’t change the rental character. Daily maid service, switchboard service, or dining-hall meals push the activity into business territory.⁷ If the operation looks and feels like a hotel, it probably isn’t a rental for Form 8825 purposes.

Records to Gather Before You Start

Form 8825 uses a separate column for each property, so the entity needs clean per-property records of every dollar collected and spent. Lumping everything together and dividing later creates errors that surface at the property-level net.

On the income side, pull total gross rents from tenants and any other income tied to the rental activity: late fees, forfeited deposits kept as income, laundry machine revenue. The revised form splits these onto Line 2a for gross rents and Line 2b for other rental-related income, with a combined total on Line 2c.¹

On the expense side, organize costs into the 12 categories the form breaks out on Lines 3 through 14:

Line 3, advertising
Line 4, auto and travel
Line 5, cleaning and maintenance
Line 6, commissions
Line 7, insurance
Line 8, interest
Line 9, legal and other professional fees
Line 10, real estate taxes
Line 11, repairs
Line 12, utilities
Line 13, wages and salaries
Line 14, depreciation

Anything that doesn’t fit one of those categories goes on Line 17 as “Other deductions,” and the entity must attach an itemized statement listing each Line 17 expense.⁸ Common Line 17 items include HOA or condo fees, property management fees, pest control, and landscaping. Entities with a Schedule M-3 filing requirement use the new Schedule A (Form 8825) to detail Line 17 expenses instead of a freeform attachment.¹

Keep supporting documentation for at least three years from the filing date. Longer is safer when the return involves significant basis calculations or carryforward losses.⁹

Completing the Form Line by Line

The December 2025 revision fits four properties on page 1 and four more on a redesigned page 2. Entities owning more than eight properties attach additional copies of page 2. Lines 1 through 19 are completed for each property; the summary lines (20a through 23) appear only on page 1 and reflect combined totals from every page.¹

Line 1: Property Identification

Line 1 captures the address and type code for each property, along with new information codes for acquisitions, dispositions, or other transactions during the year.¹⁰

Lines 2a Through 2c: Income

Line 2a takes gross rents. Line 2b takes any other income related to the rental activity. Line 2c is the sum.¹⁰

Lines 3 Through 17: Expenses

Enter each property’s expenses in the appropriate line from the list above. Line 14, depreciation, deserves its own calculation and is covered in the next section. Line 17 collects anything that didn’t fit into Lines 3 through 14, with the required itemized attachment (or Schedule A for M-3 filers).

Lines 18 and 19: Per-Property Net

Line 18 totals all expenses for each property (Lines 3 through 17). Line 19 subtracts Line 18 from Line 2c to give the income or loss for that individual property.¹⁰ This is where errors most often surface. If a number looks off later, check the per-property net before chasing problems in the summary lines.

Lines 20a Through 23: Portfolio Summary

Line 20a totals rental real estate income across every property page. Line 20b totals expenses. Line 21 captures any net gain or loss from the sale of rental property reported on Form 4797. Line 22a picks up net rental real estate income or loss flowing through from other partnerships, estates, or trusts in which the entity is a partner or beneficiary.¹⁰

Line 23 combines Lines 20a through 22a to produce the entity’s overall net rental real estate income or loss.¹¹

Calculating Line 14 Depreciation

Depreciation is almost always the largest single deduction on Form 8825, and it is calculated separately before the result is entered on Line 14. The Modified Accelerated Cost Recovery System (MACRS) applies to virtually all rental property placed in service after 1986.¹²

MACRS assigns fixed recovery periods by property type:

Residential rental property: 27.5 years
Nonresidential real property (offices, retail, warehouses): 39 years

Both types use the mid-month convention. The IRS treats the property as placed in service (or disposed of) at the midpoint of the month, regardless of the actual date.¹³

The depreciable basis is the property’s cost minus the value of the land. Land is never depreciable. If the entity placed any property in service during the current year, or claims depreciation on a vehicle or other listed property, it must complete and attach Form 4562 to support the Line 14 figure.¹⁴

Where the Line 23 Result Goes

The net figure from Line 23 flows to Schedule K, Line 2 on either Form 1065 or Form 1120-S.¹¹ Schedule K aggregates the entity’s income, deductions, and credits, and each component is then allocated to owners based on ownership percentage or the terms of the partnership agreement.

The rental income or loss originating on Form 8825 lands in Box 2 of each owner’s Schedule K-1.¹¹ The entity must code this amount correctly as passive or non-passive activity income. Miscoding doesn’t just create an entity-level compliance issue; it causes every owner to misapply the passive activity rules on their personal return.

Deadlines, E-Filing, and Penalties

Form 8825 is attached to the entity’s main return, so it follows that return’s deadline. Form 1065 and Form 1120-S are due by the 15th day of the third month after the end of the entity’s tax year, which is March 15 for calendar-year filers.¹⁵ Filing Form 7004 grants an automatic six-month extension, moving the return deadline to September 15 for calendar-year entities. The extension covers the return itself; Schedule K-1s should still go to owners by the original due date when possible.

Partnerships and S corporations that file 10 or more returns of any type during the year (income, employment, excise, and information returns combined) must file electronically.¹⁶ Partnerships with more than 100 partners must e-file regardless of the 10-return threshold. Paper filing remains an option only for smaller entities below both triggers.

Late-filing penalties are steep. For a Form 1065 or Form 1120-S filed late after December 31, 2025, the penalty is $255 per partner or shareholder per month or partial month the return is late, for up to 12 months.¹⁷ A four-partner LLC that misses the deadline by three months faces a $3,060 penalty, with no offsetting deduction.

Accuracy matters separately. Errors on Form 8825 that lead to an underpayment of tax at the owner level can trigger a 20% accuracy-related penalty for negligence or a substantial understatement.¹⁸ It is assessed on the underpayment, not gross income, and it is avoidable with careful per-property recordkeeping.

1
Internal Revenue Service. Instructions for Form 8825 and Schedule A (12/2025)
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Internal Revenue Service. About Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation
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Internal Revenue Service. Entities 3
4
Internal Revenue Service. 2025 Instructions for Schedule E (Form 1040)
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Office of the Law Revision Counsel. 26 U.S. Code 469 – Passive Activity Losses and Credits Limited
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Internal Revenue Service. Instructions for Form 8582 (2025) – Section: Exceptions
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Internal Revenue Service. Rents from Real Property – Rendering of Services
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Internal Revenue Service. Instructions for Form 8825 and Schedule A (Rev. December 2025)
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Internal Revenue Service. How Long Should I Keep Records
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Internal Revenue Service. Form 8825 (Rev. December 2025)
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Internal Revenue Service. 2025 Instructions for Form 1065
12
Internal Revenue Service. Publication 946 – How To Depreciate Property – Section: 4. Figuring Depreciation Under MACRS
13
Internal Revenue Service. Publication 946 – How To Depreciate Property – Section: Which Convention Applies
14
Internal Revenue Service. Instructions for Form 8825 and Schedule A (12/2025) – Section: Line 14
15
Internal Revenue Service. Publication 509 (2026) – Tax Calendars
16
Internal Revenue Service. Instructions for Form 1065 (2025)
17
Internal Revenue Service. Failure to File Penalty
18
Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments