Form 8825: a guide for business owners

Susan Turcotte

• 22.10.24 • 5 min read

If you're a small business owner running a partnership or an S corporation that generates income from rental real estate, Form 8825 is a tax form you'll need to understand. This form helps you report income, deductions, and other financial details related to your rental properties.

In this guide, we'll walk you through Form 8825, explain its filing requirements, and how to complete it.

This content is brought to you by TFX, a top-rated tax firm for US-based small businesses.

What is Form 8825?

Form 8825 is used to report rental income and expenses for a partnership or an S corporation. It helps you determine your net income or loss from rental activities. This information will be reported to the Internal Revenue Service (IRS) and will eventually go to your partners or shareholders.

Who should file Form 8825?

If your small business is a partnership or an S corporation that owns rental real estate, you need to file Form 8825. You should submit this form with your regular business tax returns (Form 1065 for partnerships or Form 1120-S for S corporations).

If you meet one or all the listed above, you'll most likely need to use Form 8825:

• Your business earns rental income from real estate.
• Your business incurred expenses related to maintaining or operating those properties.
• Your business entity has multiple properties to report.

What information do you need to fill out Form 8825?

To fill out Form 8825, you'll need to gather key information about each of your rental properties. Let's break down the most important sections:

Rental income

Report the gross rental income earned for each property, including any rent payments received during the year. 

Maintain precise documentation of all rental income, as failing to report earnings accurately can result in penalties.

Expenses

Detail your property-related expenses, including:

• mortgage interest
• property taxes
• repairs and maintenance
• utilities
• insurance

Remember, these expenses help reduce your taxable income, so track every deductible cost carefully.

Depreciation

Depreciation allows you to deduct the cost of property improvements over time gradually. 

If you claim depreciation on rental properties placed in service during the tax year, attach Form 4562, Depreciation and Amortization. To learn more about this form, consult the IRS guidelines.

Net income or loss

Calculate the net income for each property after accounting for all rental income and expenses.

If your total expenses are higher than your income, you will report a net loss. This loss may be subject to passive activity loss limits, which we will discuss below.

How to fill out Form 8825

1. Fill out property information: Provide each rental property's street address and property type (e.g., residential or commercial).
2. Report rental income and expenses: Complete lines 1–17 for each property, inputting the rental income and deductible expenses.
3. Calculate depreciation: Include your depreciation calculations on line 14, referencing Form 4562.
4. Calculate totals: Combine the totals from all properties and complete lines 18a–21 on one form only. 

Passive activity limitations

The IRS sees rental real estate as a passive activity for most taxpayers. This means that rules about passive activity losses may limit any losses from rental properties. You can only deduct passive losses from passive income. This rule applies unless you qualify as a real estate professional.

If your rental real estate activities result in a loss, you may only deduct part of that amount. This depends on your income and other factors.

Keep in mind, each business is unique, and what is effective for one company might not be suitable for yours. Therefore, seeking assistance from a tax expert is a wise decision. At TFX, your assigned CPA will look at your situation, suggest possible solutions, and file all needed paperwork with the IRS. 

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Always consult with a tax professional regarding your specific case.  

Susan Turcotte

Susan Turcotte, a seasoned CPA with over 45 years of accounting experience, holds a Bachelor's in Accounting and a Master's in Taxation from Bryant College. See more

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