Although filling out IRS tax forms each year isn’t any fun, it is a necessary part of real estate investing. Thankfully, the tax forms for rental properties aren’t complicated. If you are investing as a member of a partnership or as an S corporation, you will need to report your earnings on Form 8825.
Making sure you fill out Form 8825 correctly is vitally important. Accurate financial reporting is required and could help you determine if you qualify for certain tax deductions.
What Is Form 8825?
IRS Form 8825 is a special tax form specifically for reporting the rental income and expenses of a partnership or S corporation. The form allows you to record the financial information for eight different properties. If you have more than eight, the additional properties can be reported on a second Form 8825.
Form 8825 is not to be used by sole proprietors or single-member LLCs. If you are filing as a sole proprietor or single-member LLC, you will record your rental real estate activities on Schedule E (Form 1040), which is used to report supplemental rental real estate income and expenses.
Who Uses Form 8825?
Form 8825 reports the rental income of partnerships or S corporations in the United States. Suppose your S corporation owns two apartment buildings, a self-storage facility, and three single-family rental homes. In that case, you will need to include the income and expenses of each property on the form.
If you are reporting partnership income, Form 8825 should be attached to Form 1065 (U.S. Return of Partnership Income). If you report S corporation income, Form 8825 should be attached to Form 1120S (U.S. Income Tax Return for an S Corporation).
It’s important to point out that Form 8825 can be used if your partnership is an LLC, but it doesn’t have to be used for all LLCs. A single-member LLC, for example, would use Schedule E (Form 1040).
What Type of Expenses Go On Form 8825?
The IRS only taxes rental real estate activity on the…