Form 8825 — Partnership Rentals Explained for Landlords

TL;DR: If you own rental property through a partnership or multi-member LLC, the entity files Form 8825 to report rental income and expenses at the entity level. Net rental income (or loss) then flows to each partner on Schedule K-1, and each partner reports it on their personal return — passive activity limits still apply individually.

_Last reviewed: July 2026 · 6 min read_

A single-member LLC's rental income lands on your personal Schedule E. But when two or more members own the LLC, or when you hold property in a formal partnership, the entity itself calculates rental results on Form 8825 before passing income or loss through to each partner. The form replaces Schedule E at the entity level — partners still report on their personal returns, but the math happens once, centrally, and everyone gets a K-1 showing their share.

Okoniq Property Hub keeps maintenance logs and expense records at the property level, so when tax season arrives your entity's preparer has a year's worth of date-stamped line items ready to transfer to Form 8825.

What is Form 8825 and when do you file it?

Form 8825 is titled "Rental Real Estate Income and Expenses of a Partnership or an S Corporation." If your rental property is owned by a partnership (general or limited), a multi-member LLC taxed as a partnership, or an S corporation, the entity files this form with its annual return (Form 1065 or 1120-S). The form calculates gross rental income, subtracts deductible expenses, and reports net income or loss for each property — or a combined total if the entity owns multiple rentals.

Single-member LLCs do not use Form 8825; they are disregarded entities for tax purposes and report rental activity on the owner's personal Schedule E. Once a second member joins, the LLC becomes a partnership by default and Form 8825 applies.

The form is due with the entity's return — March 15 for calendar-year partnerships and S corps (extensions push that to September 15). Each partner then receives a Schedule K-1 showing their distributive share of the rental income or loss, which they report on their own Form 1040.

How does rental income flow from Form 8825 to a partner's return?

The partnership calculates net rental income on Form 8825 first. Gross rents minus operating expenses (utilities, repairs, property management, insurance) minus depreciation equals the net figure. That net amount appears on the partnership's Schedule K, line 2 (for net rental real estate income) or line 3 (for net rental real estate loss).

Each partner's distributive share — determined by the partnership agreement — then flows to that partner's Schedule K-1 (Form 1065), Box 2. The partner reports the K-1 amount on their personal Schedule E, Page 2, Part II (income or loss from partnerships and S corporations). The number carries to Form 1040, where it combines with other income to determine adjusted gross income and tax liability.

Importantly, the partner does not re-calculate rental income or depreciation — the entity did that work on Form 8825. The K-1 is the final number the partner uses. Depreciation schedules stay with the entity; individual partners track their outside basis in the partnership interest (initial contribution plus allocated income, minus distributions and allocated losses) but do not hold separate depreciation records for the property itself.

What expenses appear on Form 8825 and what stays separate?

Form 8825 mirrors Schedule E in structure but operates at the entity level. Line items include:

• Gross rents (Line 3)
• Advertising, auto/travel, cleaning/maintenance, commissions, insurance, legal/professional, management fees, mortgage interest, other interest, repairs, supplies, taxes, utilities (Lines 5–19)
• Depreciation (Line 20, calculated on the entity's own Form 4562)
• Other expenses (Line 21 — anything not listed above)

The total deductible expenses (Line 22) subtract from gross rents to produce net rental income or loss (Line 26). That figure flows to Schedule K.

Entity-level expenses go on Form 8825. Partner-level expenses — for example, unreimbursed travel a partner incurs to inspect the property on the partnership's behalf — generally do not appear on Form 8825; those are miscellaneous partner expenses and are subject to different rules (many unreimbursed employee expenses lost their deduction after 2017, though partner expenses may still be deductible as a reduction of the partner's distributive share if the partnership agreement permits). Keep entity business separate from personal partner activity.

Do passive activity loss limits apply with Form 8825?

Yes, but at the partner level, not on Form 8825 itself. The partnership reports the rental income or loss on Form 8825 and issues K-1s showing each partner's share. Each partner then applies passive activity rules on their personal return.

If the rental activity is passive (which most rental real estate is unless the partner qualifies as a real estate professional), and the partner has a loss, that loss is subject to the passive loss limitations of §469. Up to a certain amount of passive rental loss may be deductible against non-passive income if the partner actively participates and meets modified adjusted gross income thresholds; losses that exceed the allowance carry forward to future years as a suspended passive loss.

The entity does not apply these limits — it simply reports the rental result. The partner's Form 8582 (Passive Activity Loss Limitations) determines how much of the K-1 loss the partner can deduct in the current year. If you have multiple K-1s from different activities, you aggregate them on Form 8582.

How does depreciation work when property is held by a partnership?

The partnership calculates depreciation on the rental property and reports it on Form 4562 (Depreciation and Amortization), then carries the amount to Form 8825, Line 20. Depreciation reduces the entity's net rental income; the reduced income flows through to the partners on K-1.

The recovery period and the placed-in-service date are determined at the entity level — if the partnership bought the property in 2024, the partnership's depreciation schedule begins in 2024. Partners do not separately depreciate the property; they receive their share of the pre-depreciation income as reduced by the entity's depreciation deduction.

Each partner tracks their outside basis in the partnership interest. Allocated losses (including the depreciation component of a rental loss) reduce outside basis. When a partner later sells their partnership interest or receives a distribution, outside basis determines gain or loss. Cost segregation studies can accelerate depreciation at the entity level, increasing current-year deductions and reducing each partner's taxable income from the K-1.

Are there special elections or considerations for partnership rentals?

Several elections that apply to rental property generally also apply when property is held in a partnership, but the entity makes the election, not the individual partner:

• Safe harbors (de minimis, small taxpayer, routine maintenance) are elected by the partnership on the partnership return.
• Section 179 expensing and bonus depreciation elections, if applicable, are made by the partnership.
• A §754 election (to adjust inside basis of partnership assets when a partner buys in or a distribution occurs) is made by the partnership but has consequences for individual partner basis. Consult the partnership's CPA if a 754 election is on the table — it is irrevocable without IRS consent and affects future K-1s.

Each partner's outside basis also determines how much loss they can deduct. If a partner's share of losses exceeds their basis, the excess loss is suspended until the partner has sufficient basis (through additional capital contributions or future income allocations). This is separate from the passive activity limits — both restrictions can apply in sequence.

FAQ

Do I file Schedule E if my rental property is in a partnership?

You report the K-1 rental income on Schedule E, Page 2 (partnerships and S corporations), but you do not complete Page 1 (direct rental real estate) for property owned by the partnership. The entity already reported income and expenses on Form 8825.

Can a single-member LLC convert to partnership treatment mid-year?

If a second member joins, the LLC becomes a partnership for tax purposes on the date the second member's interest becomes effective. The entity then files Form 1065 for the full year and issues K-1s. The former sole owner reports rental income on Schedule E for the period before the conversion and on the K-1 for the period after. Prorations depend on the exact timing — work with a CPA on the transition year.

What happens if the partnership sells the rental property?

The partnership reports the sale on Form 4797 (Sales of Business Property) and calculates gain or loss at the entity level. Depreciation recapture and capital gain both flow through to the partners on K-1 in the year of sale. Each partner's share of the gain or recapture appears on their K-1 and carries to their personal return — the character of the income (ordinary vs. capital) is determined by the entity.

Do state returns require a separate Form 8825?

Many states have their own partnership returns and rental income forms, but the structure mirrors the federal form. The partnership files a state return in each state where it owns property or does business, and issues state K-1s. Partners then report the state K-1 amounts on their resident and nonresident state returns. State sourcing rules vary.

Can I deduct travel to the rental property if I'm a partner in the LLC?

If the partnership reimburses you for the travel, the reimbursement is an entity expense and appears on Form 8825. If you pay out of pocket and are not reimbursed, the treatment depends on whether the expense is a partnership expense (deductible by the entity if documented and approved) or a partner expense (may reduce your distributive share under the partnership agreement, but subject to stricter rules). Document all business travel and consult the partnership's CPA before assuming a deduction.

<div class="glass rounded-2xl p-5 mt-7 max-w-4xl border border-red-400/30 bg-red-500/5"> <div class="flex items-start gap-3"> <span class="text-2xl flex-shrink-0">⚠️</span> <div class="flex-1 min-w-0"> <p class="text-red-200 text-sm font-bold">Not tax advice</p> <p class="text-slate-300 text-xs mt-1 leading-relaxed"> This post assumes a domestic partnership or multi-member LLC taxed as a partnership, and does not address S corporation nuances, state-specific sourcing rules, or changes in partnership composition mid-year. It does not account for your individual basis, your passive activity carryforwards, or legislation enacted after July 2026. Tax rules change and depend on your specific situation. Talk to a licensed CPA before acting on anything here, and confirm current figures on IRS.gov. </p> </div> </div> </div>