IRS Form 8825

Form 8825 is an important tax form for landlords managing rental properties through partnerships or S corporations. It’s used to report rental income and expenses to the IRS, helping you accurately determine your tax liability. Filing it correctly is essential to comply with IRS regulations and avoid an audit.

In this article, we’ll cover everything you need to know about Form 8825 as a landlord.

What is IRS Form 8825?

IRS Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, is one of several tax forms used by landlords. It’s used to report rental earnings and deductible expenses from rental real estate activities that flow through from partnerships, S-corps, multi-member LLCs, estates, or trusts. If you own rental property through one of these entities, you will need to file Form 8825.

Form 8825 also determines your net rental real estate income or loss. This figure is then reported to your partners on Form 1065 Schedule K (U.S. Return of Partnership Income).

Form 8825 vs. Schedule E: What’s the Difference?

You may be familiar with another form used to report rental income and expenses, Schedule E. Schedule E, Supplemental Income or Loss, is used to report the same type of information as Form 8825. However, Schedule E is used by individual landlords or single-member LLCs rather than partnerships and S-corps. In all other respects Schedule E and Form 8825 are essentially the same, with a few small exceptions:

• Form 8825 has a single interest category, while Schedule E has separate categories for mortgage interest and other interest.
• Form 8825 has a wages and salaries category.
• Schedule E has a management fees category.

Who Should File Form 8825?

You will need to file Form 8825 if you own rental real estate within a partnership, S-corp, or multi-member LLC.

After completing Form 8825, you will also need to transfer the results to box 2 of Schedule K-1 (Form 1065) Partner’s Share of Income, Deductions, Credits, Etc., so that your partners can accurately report their income and expenses as well.

What Information Do I Need to Complete Form 8825?

Below is a list of information you’ll need on hand for each rental property before you can complete your 8825 form:

• Addresses (street, city, state, and ZIP code)
• Type of property (SFH, Multifamily, vacation/STR, Commercial, Land, Royalties, Self-rental, Other)
• The number of days rented at fair rental value
• The number of personal use days
• Gross rental income (total income)
• A list of expenses by category:
  • Advertising
  • Auto and travel
  • Cleaning and maintenance
  • Commissions
  • Insurance
  • Legal and other professional fees
  • Interest
  • Repairs
  • Taxes
  • Utilities
  • Wages and salaries
  • Depreciation
  • Other (list)
• Names of the partnerships, estates, or trusts from which net income (loss) is being reported

Components of an 8825 Form

Once you’ve gathered the above information, you can take a look at the form itself. You can download a copy here from the IRS.

Form 8825 has three main sections: The first includes basic information about the properties, the second is where you’ll list income and expenses, and the third walks you through calculating totals and net income or loss.

Top section

This section, consisting of Box 1, establishes basic information about your rental properties. After indicating your name and employer identification number, you will report the following for each rental property (labeled alphabetically, A-D) owned within your partnership or S corporation:

• Physical address of the property – The street, city, state, and ZIP code.
• The property type code – Allowable codes for property types include: 1—Single Family Residence, 2—Multi-family Residence, 3—Vacation or Short-Term Rental, 4—Commercial, 5—Land, 6—Royalties, 7—Self-Rental, and 8—Other.
• Fair Rental Days – The number of days the property was rented at fair rental value, excluding, for instance, days that it was rented to family members or friends at a steep discount.
• Personal Use Days – The number of days you used/occupied the property personally.

Income/expenses section

The middle section, including Boxes 2-15, is where you’ll report income and expenses for each property, A through D. If you own more than four properties within a partnership or S-corp, record additional properties (E-H) on page 2 (if there are more than eight properties, attach additional Forms 8825).

For each property, report the following:

• Box 2 – Gross rents
• Boxes 3-15 – Rental real estate expenses, categorized as listed above.

Bottom section

The last section, including Boxes 16-21, walks you through the process of totaling your income and expenses and calculating your net income or loss from rental real estate activities from partnerships, estates, and trusts.

• Box 16 – Total expenses for each property (the sum of lines 3 through 15).
• Box 17 – The income or loss from each property (subtract line 16 from line 2).
• Box 18 – Total gross rents and total expenses.
• Box 19 – Your net gain or loss from the sale of any business property that year (found on Form 4797).
• Box 20 – The net income or loss from rental real estate activities from partnerships, estates, and trusts in which your partnership or S-corp is a partner or beneficiary (found on Schedule K-1). The names and employer identification numbers of these partnerships, estates, and trusts are listed in 20b (attach a schedule if more space is needed).
• Box 21 – Your net rental real estate income or loss, found by combining lines 18a through 20a.

The final result in Box 21 should also be entered on Form 1065 or 1120S: Schedule K, line 2, which is used to report these results to partners.

How to Report Rental Income & Expenses with Form 8825

Now that you understand its components, below is a step-by-step breakdown of how to report your income and expenses on Form 8825.

1. Gather the required information. Retrieve income and expenses from your books, bank statements, or export them from your rental property accounting software.
2. List all your properties and their addresses in Box 1.
3. Calculate fair rental days and report for each property. Fair rental days are days during which the property was rented at a fair rental price with the clear intention of generating income and without any significant personal use during the period.
4. Calculate personal use days and report for each property. Personal use days are days during which you (the owner), your family/friends, or anyone else paying a discounted rent price (below fair market rent) use the property for personal use. These are days during which you gain personal benefit from using or renting the property. Note: According to the IRS, a property is considered a personal residence if you use it for personal reasons for more than the greater of either 14 days of the year or 10% of the total days it’s rented to others at fair rental price. If your property is a personal residence, you don’t need to report rental income or deduct expenses.
5. Record gross rents in Box 2. Annual gross rent is the total amount of rent received from tenants throughout the tax year, sometimes including other payments tenants make regularly, like utilities paid alongside the rent.
6. Record expenses in Boxes 3-15. These should be categorized as indicated, summed up for the tax year, and divided by property.
7. Follow instructions to total your income (loss) and expenses in Boxes 16-18.
8. Transfer net gain (loss) from Form 4797 if you sold a property that year in Box 19.
9. Transfer net income (loss) from rental real estate activities from partnerships, estates, and trusts in which this partnership or S-corp is a partner/beneficiary (from Schedule K-1) in Box 20.
10. Calculate net rental real estate income or loss by combining lines 18a through 20a in Box 21.
11. Enter result from Box 21 on Form 1065 or 1120S Schedule K to report to partners.
12. Check your work or give the form to a tax professional to review.
13. File Form 8825 with your tax return when completed.

Other Tips and Notes

Below are a few additional notes to keep in mind before you start your 8825 form:

1. In addition to the Form 8825 instructions included with the form, read the following before beginning:

• • Passive Activity Limitations in the instructions for Form 1065 or Form 1120S (defines “rental activity”)
  • Extraterritorial Income Exclusion in instructions for Form 1065 or 1120.

2. Do not report any of the following on Form 8825:

• • Income or deductions from a trade or business activity or a rental activity other than rental real estate
  • Portfolio income or deductions
  • Section 179 expense deduction
  • Other items that must be reported separately to the partners or shareholders
  • Commercial revitalization deductions

3. Lastly, if your partnership or S-corp placed property in service during the current tax year or claimed depreciation on any vehicle or other property, remember that you must complete Form 4562 Depreciation and Amortization to calculate your depreciation deduction.

Always seek professional tax advice if you have any questions about Form 8825 or other aspects of your rental real estate taxes.

Conclusion

Accurately completing Form 8825 is important for landlords within partnerships and S-corps to properly report rental income and expenses. Doing so ensures compliance with tax rules while allowing you to claim the best deductions and reduce your taxable income. With organized records, you can simplify tax filing and make the most of your rental investments.

Disclaimer: Ledgre does not provide tax or legal advice. All information and materials available on this site are for general informational purposes only. Contact a tax professional for advice with respect to a specific tax matter.