Form 8810: Corporate Passive Losses (IRS)

Form 8810 figures the passive activity loss (PAL) and the passive activity credit for certain corporations. Personal service corporations and closely held corporations use it. Individuals, estates, and trusts use Form 8582: Passive Activity Loss Limitations instead.

This post is general information from the 2025 Form 8810 and its instructions. It does not say whether a corporation falls into these groups.

Who must file

The instructions say personal service corporations and closely held corporations must file Form 8810 when they have losses or credits from passive activities. Prior-year amounts that were not allowed count too.

Closely held corporations

A corporation is closely held if, in the last half of the tax year, more than 50% of the value of its outstanding stock is owned by, or for, five or fewer individuals. A personal service corporation is not treated as closely held.

Personal service corporations

A personal service corporation has a principal activity of performing personal services. The instructions say that test is met when compensation for personal services is more than 50% of total compensation costs.

The instructions list the fields that count as personal services. They include health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting.

The services must be performed mostly by employee-owners. The instructions say more than 20% of compensation for personal services must go to employee-owners. That is the test. An employee-owner works for the corporation and owns its stock on some day of the testing period. The owner must hold more than 10% of the stock's fair market value on the last day of that period.

For most corporations, the testing period is the prior tax year. A new corporation has a special testing period. The instructions describe it.

A quick check before you file

Ask two questions. Is the corporation a personal service corporation? Is it a closely held corporation? If the answer to both is no, Form 8810 does not apply. If either answer is yes, read the tests above.

Terms the instructions use

Net income. Current-year income from an activity, minus current-year deductions from it.
Net loss. Current-year deductions from an activity, minus current-year income from it.
Overall gain. Net income from an activity that is more than the prior-year unallowed losses from it.

How the loss limits work

A passive activity is a trade or business where the corporation did not materially participate. A rental activity is passive regardless of participation.
A corporation has a PAL when its passive losses are more than its passive income. Prior-year unallowed losses count too.
For a closely held corporation, the test also counts its net active income.
Other limits come first. The instructions list basis, the at-risk rules, and the section 163(j) interest limit.

How the credit limits work

A passive activity credit works in a similar way. A personal service corporation has one when its passive credits are more than the tax on its net passive income. Prior-year unallowed credits count too. A closely held corporation also counts the tax on its net active income.

Rental activities

The instructions describe exceptions for rental activities. One applies when the average period of customer use is 7 days or less. Another applies when it is 30 days or less. For that one, significant personal services must have been provided. The instructions explain how to figure the average period.

In short

Form 8810 applies to a narrow group of corporations. The corporation must first be one of those types. Then the loss and credit limits apply.

For how a corporation files its return, see Form 1120: The Corporate Income Tax Return and Who Must File It. For the rules that apply to individuals, read the Form 8582 post.

Sources: Sources: IRS, Form 8810, Corporate Passive Activity Loss and Credit Limitations (2025) (https://www.irs.gov/pub/irs-pdf/f8810.pdf); Instructions for Form 8810 (2025) (https://www.irs.gov/pub/irs-pdf/i8810.pdf) This is general information, not advice about your specific return.

More guides on: Tax credits and deductions

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