Schedule K-1 From a Partnership: The Basics

If you own part of a partnership, you may get a Schedule K-1 each year. The partnership prepares it and sends it to you. It shows your share of the partnership's income, deductions, and credits. This guide is general information. It is not advice about your return.

The partnership files, and you report your share

Publication 541 says a partnership generally does not pay income tax itself. Its profits and losses pass through to the partners. Each partner must include the partnership items on their own return.

The partnership files Form 1065, U.S. Return of Partnership Income. Publication 541 says that return shows the name and address of each partner and each partner's share of taxable income. If an LLC is treated as a partnership, it also files Form 1065.

What the Schedule K-1 is

Publication 541 refers to the Schedule K-1 (Form 1065) as the statement of your share. The partner's instructions for the schedule explain which line on your return each item goes on. Keep the schedule with your records for the year.

If you receive a Schedule K-1, do not assume the partnership's Form 1065 is your return. Your share is what goes on your return, based on the schedule. Publication 541 says the Form 1065 must show each partner's distributive share of taxable income, so the schedule you receive is the part that applies to you.

Distributions and your basis

A distribution is money or property the partnership gives to a partner. Publication 541 says a partnership generally does not recognize gain or loss because of its distributions. Your basis in your partnership interest goes down by the money and the adjusted basis of property you receive. It does not go below zero.

Publication 541 gives an example. A partner's basis is $14,000. The partner receives $8,000 in cash and land with a basis of $2,000. The cash does not exceed the basis, so the partner has no gain on the distribution now. The basis drops to $4,000. Gain on the land comes later, when the partner sells or disposes of it.

If the cash you receive is more than your basis, you may have gain. Track your basis so you know where you stand.

Publication 541 also says money or property a partner withdraws in anticipation of the current year's earnings is treated as a distribution received on the last day of the partnership's tax year.

Spouses who run a joint business

A qualified joint venture may choose not to be treated as a partnership. Publication 541 lists the conditions. The only members must be spouses who file a joint return. Both spouses must elect out, both must materially participate, and the business must be co-owned by both spouses and not held in the name of a state law entity such as a partnership or an LLC. If those conditions are not met, the business is generally treated as a partnership.

Limits that can apply

Publication 541 points to Publication 925 for the passive activity and at-risk rules. These rules can limit how much of a partnership loss you may deduct. Our guide to passive activity losses explains the passive rule in plain terms.

Simple steps

1. Look for the Schedule K-1 from each partnership you own a share of.
2. Check your name, address, and share against your own records.
3. Keep a record of your basis, and update it when you receive distributions.
4. Report each item on the line the partner's instructions show.

Upload your documents and answer a few simple questions. Your preparer reviews every deduction and credit and lets you know when your return is ready to sign.

Sources: Sources: IRS, Publication 541 (Rev. December 2025), Partnerships (https://www.irs.gov/pub/irs-pdf/p541.pdf) This is general information, not advice about your specific return.

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