Form 8866: Look-Back Interest on Income Forecast Depreciation
Published November 8, 2026
Form 8866 figures look-back interest on certain property depreciated under the income forecast method. That method is generally limited to motion picture films, video tapes, sound recordings, copyrights, books, and patents. Section 167(g) requires the look-back interest computation for this property.
This post is general information from the IRS form and instructions. It does not say whether particular property or a particular owner has interest to figure.
Who files
You generally file Form 8866 for each recomputation year. The property must be placed in service after September 13, 1995, and depreciated under the income forecast method. The look-back method does not apply if the unadjusted basis is $100,000 or less at the end of the recomputation year.
Recomputation years
A recomputation year is generally the third and tenth tax years after the year the property was placed in service. A year is not a recomputation year if the actual income was within 10 percent of the estimated income for each earlier year.
The form starts from the taxable income shown for each prior year, as previously adjusted. It then recomputes the tax for those years, using lines 1 through 5.
Pass-through entities
A partnership or S corporation that is not closely held must apply the look-back method at the entity level. This applies to property for which substantially all of the gross income is from U.S. sources. An entity is closely held if five or fewer persons hold 50 percent or more of its beneficial interests by value. The test applies at any time during a year with income from the property.
If the entity does not apply the method at its level, an owner files Form 8866 for the tax year that includes the end of the entity's recomputation year. The entity gives the owner the information needed on Schedule K-1.
Interest owed or due to you
If you owe interest, or no interest is due to you, attach Form 8866 to your income tax return. You do not sign the form, and the paid preparer section is not completed. The interest goes on the right line of the return. For 2025 individual returns, the instructions point to Schedule 2 (Form 1040), Part II, line 17n.
If interest is due to you, do not attach the form to your return. File Form 8866 separately at the address listed in the instructions. Individuals and all other filers use different addresses.
Change of taxpayer
If the taxpayer changes before the recomputation year, the taxpayer as of the end of the recomputation year is responsible. That covers interest for the years the property was depreciated under the income forecast method. The instructions say that generally only the taxpayer that had an overpayment for a year may claim interest on that overpayment.
Corrections
A corrected Form 8866 is needed only when the line 6 amount for a prior year changes. A change can come from an error, an examination, or another cause. The instructions describe the steps for each case. They also say when the word "Amended" goes at the top of the form.
Timing
Form 8866 is due with the income tax return, including extensions. Keep a copy of the form and any attached schedules for your records.
Mistakes to avoid
- Filing when the property had an unadjusted basis of $100,000 or less at the end of the recomputation year.
- Attaching the form when interest is due to you. It is filed separately in that case.
- Skipping the Schedule K-1 information from a pass-through entity.
- Filing late. The form is due with the return, including extensions.
For a related look-back computation, see Form 8697: Look-Back Method for Long-Term Contracts.
Sources: Sources: IRS, Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method (Rev. December 2025) (https://www.irs.gov/pub/irs-pdf/f8866.pdf); Instructions for Form 8866 (Rev. December 2025) (https://www.irs.gov/pub/irs-pdf/i8866.pdf) This is general information, not advice about your specific return.
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