A note on timing. The IRS published the December 2025 revision of Form 8825, Schedule A and the joint instructions for tax years beginning in 2025. Those returns, for calendar-year entities, are the ones filed in 2026. The instructions do not expressly address tax years beginning in 2026, so check the IRS forms page for a newer revision before you file.
This guide covers eligibility, how Schedule A connects to Form 8825, each category, records, codes, filing flow and common errors.
Key Takeaways
- Only entities with a Schedule M-3 filing requirement complete Schedule A.
- Schedule A line 31 must match Form 8825, line 17.
- Direct wages go on line 13, and depreciation on line 14.
- Australian owners face separate withholding and reporting rules.
What Is Schedule A (Form 8825) and Who Must File It?
Schedule A carries the IRS title "Rental Real Estate Other Deductions." It attaches to Form 8825, which reports rental income and expenses for partnerships and S corporations. Form 8825 is filed with Form 1065 or Form 1120-S; Schedule A replaces none of those forms.
Which entities use Schedule A
Form 8825 applies to partnerships (including multi-member LLCs taxed as partnerships) and S corporations. Individuals, sole proprietors, single-member disregarded LLCs and C corporations do not use it.
Schedule A is narrower still. Partnerships and S corporations with a Schedule M-3 filing requirement complete a Schedule A for each listed property. Everyone else enters other deductions directly on Form 8825, line 17.
For Form 1065 filers, any one of these triggers M-3:
- Year-end total assets of $10 million or more
- Adjusted total assets of $10 million or more
- Total receipts of $35 million or more
- A reportable entity partner holding 50% or more of capital, profit or loss
Form 1120-S filers must file M-3 when year-end total assets reach $10 million or more, per the Form 1065 instructions. Filing M-3 voluntarily does not create the requirement.
One caution for Australian owners: S corporations cannot have partnerships, corporations or non-resident alien shareholders. An Australian-owned rental entity is therefore almost always a partnership, or a C corporation outside Form 8825 altogether.
Not the Form 1040 Schedule A
Schedule A (Form 8825) covers business rental deductions. Schedule A (Form 1040) covers individual itemised deductions. Different form, different purpose.
Practical test: Confirm the entity's federal classification, its rental activity, its M-3 status and the current instructions, in that order.
What Changed for Form 8825 and Schedule A?
The December 2025 revisions introduced several changes. Verify each against the final instructions for your return.
- Line 2 now splits into 2a gross rents, 2b other income related to rental real estate, and 2c total rental real estate income
- Lines 15 and 16 are reserved for future use
- Line 17 reports the Schedule A total for M-3 filers
- Transaction-information codes were added for M-3 filers
- Schedule A is new for M-3-required filers
Property and other-information codes
Property-information codes (line 1, column b) apply to everyone:
| Code | Description |
|---|---|
| 1 | Single-family residence |
| 2 | Multi-family residence |
| 3 | Vacation or short-term rental |
| 4 | Commercial |
| 5 | Land |
| 6 | Royalties |
| 7 | Self-rental |
| 8 | Other (add a description) |
Column (c) other-information codes A through I apply only to M-3-required entities. They cover contributions, exchanges, acquisitions, new construction, distributions, dispositions and abandonment.
Take the exact wording from page 2 of the current Form 8825, because code E is reserved.
Verify before filing: compare the current Form 8825, Schedule A, Schedule M-3 instructions and the Form 1065 or 1120-S instructions. Line numbers and codes can shift between revisions.
How to Complete Schedule A (Form 8825) Step by Step
Gather and map your records
Pull these records together first:
- Trial balance and property-level ledger
- Rent roll, invoices, bank and loan statements
- Depreciation schedules and last year's return
Separate rental activity from non-rental business activity before you code anything.
Then map your chart of accounts to the Schedule A lines. Dumping uncategorised costs into "Other" is the fastest way to invite IRS questions.
The December 2025 categories
| Line | Category |
|---|---|
| 1 | Asset management fee |
| 2 | Bad debt expense |
| 3 | Building maintenance |
| 4 | Common charges |
| 5 | Contract services |
| 6 | Debt extinguishment costs |
| 7 | Ground rent |
| 8 | Grounds maintenance |
| 9 | Homeowner association fee |
| 10 | Incentive fee |
| 11 | Landscaping |
| 12 | Leased employee expense |
| 13 | Management fee |
| 14 | Other taxes |
| 15 | Prepayment penalty |
| 16 | Reimbursed wages/salaries (to management company) |
| 17 | Section 481(a) adjustments |
| 18 | Tenant renovations |
| 19 | Tenant services |
| 20 | Turnover expenses |
| 30 | Other |
| 31 | Total |
Lines 21 to 29 are reserved. A few practical examples:
- A $4,200 quarterly payment to a property manager goes on line 13
- Cleaning and repainting a vacated unit is a turnover expense, line 20
- Fees to a strata-style owners' body go on line 4 (common charges) or line 9 (HOA fees)
- Direct payroll for an on-site caretaker belongs on Form 8825, line 13, not Schedule A
For line 30, the current form and instructions set no separate description requirement. Still, keep a clear internal description for every amount.
Repairs or capital improvements?
Amounts that are not improvements are generally deductible as repairs. Improvements (betterments, restorations or adaptations to a new use) must be capitalised under the tangible property final regulations. Restoring a hurricane-damaged building is the IRS's own example of capitalisation.
What stays off Schedule A
- Depreciation (Form 8825, line 14, with Form 4562 where required)
- Section 179 amounts, which are reported separately to owners
- Capital improvements and land
- Personal and non-rental expenses
Total and reconcile
Add lines 1 to 30 and enter the result on line 31 and on Form 8825, line 17. Do this property by property. Then run this checklist:
- Schedule A line 31 equals Form 8825, line 17
- Form 8825, line 23 equals Schedule K, line 2
- Owner K-1, box 2 agrees to Schedule K
- Schedule M-3 book-to-tax differences are explained
- The trial balance ties to every figure
Records, Deadlines, and Common Schedule A Mistakes
Records to keep
For each deduction, keep the invoice, proof of payment, property identifier, allocation method and capitalisation analysis. Keep contracts and invoices for any related-party or management-company charge. Partnership return support is usually kept three years after the later of the due date or filing date.
Deadlines and penalties
Form 8825 and Schedule A are filed with the entity's Form 1065 or 1120-S.
- Calendar-year 2025 returns are due 16 March 2026
- Form 7004 generally gives a six-month filing extension, but not a payment extension
- Late or incomplete returns attract a penalty of $255 per owner per month, up to 12 months
- For returns required in 2027, the monthly penalty is $260
Dates falling on a weekend or holiday move to the next business day.
Common mistakes
- Using an outdated form revision
- Filing Schedule A when not required, or omitting it when required
- Mixing gross rents with other rental income
- Duplicating expenses on Form 8825 and Schedule A
- Treating improvements as repairs
- Skipping reconciliation
- Leaving large unsupported amounts in "Other"
Cross-border cautions for Australian owners
- Addresses: write the city, state or province and full country name, with no abbreviation
- Currency: report in USD, translating at the rate prevailing when items are received, paid or accrued
- Withholding: section 1446(a) covers foreign partners (Forms 8804, 8805, 8813); section 1445 covers U.S. real property dispositions; section 1446(f) covers certain partnership interest transfers
- Treaty: the U.S.-Australia treaty lets the U.S. tax real property income and gains where the property sits. It does not exempt them
Assess these separately from Schedule A preparation.
How Schedule A Flows Through the Entity Return
Amounts move through the return in this order:
- Property records
- Schedule A line 31
- Form 8825 line 17
- Form 8825 line 23
- Schedule K line 2
- Each owner's Schedule K-1 box 2
Confirm the box numbers against the current form revision.
Schedule A shows expense detail only. It does not settle an owner's final taxable result. Losses pass through basis, at-risk, passive activity and excess business loss limits, in that order. Affected owners may need Form 6198 or Form 8582.
When to get help
Professional support makes sense when you face:
- Multiple properties
- M-3 reporting
- Related-party charges
- Acquisitions or disposals
- Foreign owners
- Missing records or large book-to-tax differences
VJM Global's tax professionals are trained in U.S. tax law and prepare Forms 1040, 1065 and 1120. The firm has served 250+ Australian businesses and can help Australian owners organise rental records and keep entity-level schedules consistent with the wider return.
Frequently Asked Questions
What is the purpose of IRS Form 8825?
It reports rental real estate income, expenses, depreciation and net income or loss for partnerships and S corporations. Individuals report rentals elsewhere, such as on Schedule E.
What deductions can you claim on a rental?
Typical items include advertising, cleaning, insurance, interest, legal fees, repairs, taxes, utilities, wages and depreciation. Personal costs and capital improvements are treated separately, and interest may be limited.
What can I write off on Schedule A?
Qualifying other rental deductions not already listed on Form 8825's main expense lines, such as management fees, landscaping or turnover costs. Follow the current IRS category list.
What are the codes used on Form 8825?
Property codes 1 to 8 describe the property type. Letters A to I are other-information codes for M-3-required entities only. Use the current IRS list.
Who must file Schedule A (Form 8825) in 2026?
A partnership or S corporation with rental real estate and a Schedule M-3 filing requirement. Confirm against the final instructions for your tax year.
How does Schedule A flow into Form 1065 or Form 1120-S?
Line 31 carries to Form 8825, line 17. The property results then total on line 23, feed Schedule K, line 2, and reach owners through Schedule K-1, box 2.
