Where Do I Report Schedule K-1 Income on My 1040?

To report Schedule K-1 income on your Form 1040, route each item through the correct supporting schedule first, then let the totals flow to the 1040: ordinary business income and rental income go on Schedule E, interest and dividends on Schedule B, capital gains on Schedule D, and certain credits and deductions through their own forms before landing on Schedule 1, Schedule 3, or a numbered line of the 1040 itself. Nothing from a K-1 goes directly onto the 1040 without a stop in between.

Which K-1 You’re Holding

Three versions of Schedule K-1 exist, and the box numbers are not the same across them:

Schedule K-1 (Form 1065) from partnerships and most LLCs taxed as partnerships
Schedule K-1 (Form 1120-S) from S corporations
Schedule K-1 (Form 1041) from estates and trusts

Interest income sits in Box 5 of a partnership K-1 but Box 1 of an estate or trust K-1, for example.¹² Box references below follow the partnership K-1 unless noted, since that’s the most common. For an S-corp or estate/trust K-1, check the instructions attached to your form for the matching box numbers.

You generally do not attach the K-1 to your 1040. The entity files its own copy with the IRS and you keep yours. One exception: an estate or trust beneficiary must attach the K-1 if it reports backup withholding in Box 13, Code B.²

Ordinary Business Income

The single most common K-1 item is ordinary business income or loss. It sits in Box 1 on both partnership and S-corporation K-1s, and it goes to Schedule E, Part II, line 28.¹³ Which column depends on your role. If you materially participated in the business, income goes in column (i) and any loss in column (k). If you were a passive investor, income goes in column (h) and any allowable loss in column (g). The Schedule E total flows to Schedule 1 of the 1040, line 5.

Rental Income and Guaranteed Payments

Net rental real estate income or loss from a partnership appears in Box 2 and also goes to Schedule E, Part II.⁴ Rental activities are generally treated as passive, so losses face the passive activity limits unless you qualify as a real estate professional. Rental income is generally not subject to self-employment tax.

Guaranteed payments show up in Box 4a (for services) and Box 4b (for the use of capital). These are payments the partnership makes to a partner regardless of business performance. Guaranteed payments for services are subject to SE tax and get reported on Schedule E, Part II.¹

Interest, Dividends, and Royalties

Portfolio income from a partnership K-1 splits across two schedules:

Interest income (Box 5) goes to Schedule B, Part I, then to Form 1040, line 2b.
Ordinary dividends (Box 6a) and qualified dividends (Box 6b) go to Schedule B, Part II. Qualified dividends also get entered on Form 1040, line 3a, where the capital gains rate applies.
Royalties (Box 7) go to Schedule E, Part I, line 4.¹

You must file Schedule B if your total interest or ordinary dividends from all sources exceed $1,500 for the year, or if you had a financial interest in a foreign account.⁵

Estate and trust beneficiaries read different boxes for the same items. Interest is in Box 1, ordinary dividends in Box 2a, qualified dividends in Box 2b, and other portfolio income like royalties and annuities in Box 5.² The destinations on your return are the same.

Capital Gains and Losses

Capital gains and losses from a partnership K-1 are split by holding period. Short-term gains or losses from Box 8 go to Schedule D, Part I, line 5. Long-term gains or losses from Box 9a go to Schedule D, Part II, line 12.¹ Schedule D nets everything for the year.

Two special categories need extra steps. Collectibles gains in Box 9b are taxed at up to 28%, and unrecaptured Section 1250 gain in Box 9c is taxed at up to 25%. Both require the Schedule D Tax Worksheet rather than the standard calculation. If the partnership provides detail on specific asset sales, you may also need Form 8949 before entering totals on Schedule D.⁶

Section 179, Credits, and Other Pass-Through Items

Several K-1 items can’t move to Schedule E or the 1040 without a stop at an intermediary form first.

Section 179 deduction. Reported in Box 12 on a partnership K-1 or Box 11 on an S-corporation K-1. It goes to Form 4562, which applies the overall dollar cap and the taxable-income limit at the individual level before the deduction flows back to Schedule E.¹⁷ For 2026 the maximum is $2,560,000, phasing out once qualifying property placed in service exceeds $4,090,000.

Investment interest expense. Partnerships report it in Box 13, Code H.⁸ Run it through Form 4952, which caps the deduction at your net investment income.⁹ The allowed amount from Form 4952, line 8, then goes to Schedule A, line 9.

Business tax credits. Typically Box 15 for partnerships and Box 13 for S corporations, with code letters identifying each credit. They funnel through Form 3800 to apply the general business credit limitation, and the allowed credit flows to Schedule 3.¹⁰

Foreign taxes. Partnership Box 16 tells you a Schedule K-3 is attached with the country-by-country detail; S-corp shareholders find foreign taxes paid in Box 16, Code F. Use the K-3 to complete Form 1116 for the foreign tax credit.¹¹³ If your total creditable foreign taxes are $300 or less ($600 joint), you can skip Form 1116 and claim the credit directly on Schedule 3.¹²

Qualified business income. The Section 199A information sits in Box 20, Code Z on a partnership K-1 or Box 17, Code V on an S-corp K-1, usually with an attached statement breaking out the components. Feed those figures into Form 8995 or Form 8995-A, and the deduction lands on Form 1040, line 13.¹³

Self-Employment Tax

Whether K-1 income triggers SE tax depends on the entity. S-corporation K-1 income is never subject to SE tax, no matter how active you are.³ Estate and trust K-1 income is also exempt.

Partnership K-1 income is different. If you’re a general partner or an LLC member who materially participates, your share of business income is subject to SE tax. The partnership reports your net self-employment earnings in Box 14, Code A, and that figure goes on Schedule SE.¹ Before entering the Box 14 amount on Schedule SE, general partners should reduce it by any Section 179 deduction and any unreimbursed partnership expenses.

Net Investment Income Tax

K-1 income can trigger an extra 3.8% tax. The net investment income tax applies if your modified adjusted gross income exceeds $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately), and it’s calculated on Form 8960.¹⁴ It reaches interest, dividends, capital gains, rental income, royalties, and business income from activities in which you didn’t materially participate.

Income already subject to self-employment tax is generally excluded from the NIIT, so an active general partner usually won’t pay both on the same dollar. Capital gains and other items outside self-employment earnings can still be caught by the NIIT even for active partners.¹⁵ The thresholds are not adjusted for inflation.

Loss Limits: What Can Actually Reach Your 1040

A K-1 loss doesn’t drop straight onto Schedule E. Three limits apply in order, and each one can reduce or stop the loss.

Basis

Your deductible loss can never exceed your basis in the entity. S-corporation shareholders track stock and debt basis on Form 7203, which is required if you’re claiming a loss, took a distribution, or disposed of stock.¹⁶ Partners track basis on their own worksheets, often using the optional computation section in the K-1 instructions. Losses over basis are suspended until your basis rises.

At-Risk

Losses that clear the basis test face the at-risk rules next. Your at-risk amount includes cash and property contributed plus your share of recourse debt, but excludes amounts protected by guarantees. Excess loss is disallowed and carried forward. The calculation happens on Form 6198.¹⁷

Passive Activity

If you didn’t materially participate, passive losses can only offset passive income. They can’t reduce wages, interest, or other nonpassive income. Form 8582 figures the allowable amount.¹⁸ Unused passive losses carry forward until you generate passive income or dispose of the entire interest in a taxable transaction.

If Your K-1 Arrives Late

Partnerships and S corporations must send you a K-1 by the 15th day of the third month after their tax year ends: March 15 for calendar-year entities.¹⁹ Extensions can push a K-1 into September or later. If you’re still waiting, file Form 4868 for an automatic six-month extension to October 15.²⁰ The extension buys time to file, not time to pay. Estimate any tax due and send payment by April 15 to avoid interest.

1
Internal Revenue Service. Partner’s Instructions for Schedule K-1 (Form 1065) (2025)
2
Internal Revenue Service. Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040 or 1040-SR (2025)
3
Internal Revenue Service. Shareholder’s Instructions for Schedule K-1 (Form 1120-S) (2025)
4
Internal Revenue Service. 2025 Instructions for Schedule E (Form 1040)
5
Internal Revenue Service. About Schedule B (Form 1040), Interest and Ordinary Dividends
6
Internal Revenue Service. 2025 Instructions for Form 8949 – Sales and Other Dispositions of Capital Assets
7
Internal Revenue Service. 2025 Shareholder’s Instructions for Schedule K-1 (Form 1120-S)
8
Internal Revenue Service. Instructions for Form 1065 (2025)
9
Internal Revenue Service. Investment Interest Expense Deduction
10
Internal Revenue Service. About Form 3800, General Business Credit
11
Internal Revenue Service. Partner’s Instructions for Schedule K-3 (Form 1065) (2025)
12
Internal Revenue Service. Foreign Tax Credit – How to Figure the Credit
13
Internal Revenue Service. Instructions for Form 8995
14
Internal Revenue Service. Instructions for Form 8960 (2025)
15
Internal Revenue Service. 2025 Instructions for Form 8960
16
Internal Revenue Service. Instructions for Form 7203
17
Internal Revenue Service. Instructions for Form 6198 At-Risk Limitations
18
Internal Revenue Service. 2025 Instructions for Form 8582 – Passive Activity Loss Limitations
19
Internal Revenue Service. Publication 509 (2026), Tax Calendars
20
Internal Revenue Service. Form 4868 – Application for Automatic Extension of Time To File U.S. Individual Income Tax Return