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New Draft IRS Forms Released

Over the past few weeks, the IRS has issued draft forms and schedules that are related to (a) the reporting on Forms 1065 and 1120-S of income and expenses concerning rental real estate and (b) the new deductions available to individuals – courtesy of OBBBA (view our latest OBBBA coverage). Draft forms and schedules that were recently issued and are discussed in this communication include: (1) Form 8825, Rental Real Estate Income and Expenses of a Partnership or S Corporation, which includes new Schedule A, Rental Real Estate Other Deductions, and (2) new Schedule 1-A, Additional Deductions, which will be used to calculate and report deductions taken by individuals pursuant to provisions enacted as part of OBBBA.

Draft Form 8825 and new Schedule A suggest that the IRS is shifting towards more granular reporting for partnership and S corporation landlords. More specifically, draft Form 8825 separates “other income” with respect to a rental real estate activity from “gross rents” by adding a second income line, “[o]ther income related to rental real estate activity.” Also, draft Form 8825 includes new Schedule A, which replaces the “[o]ther deductions” line that was on Form 8825 with 20 expense categories. Interestingly, (whether an oversight by IRS or an intentional omission) neither the draft Form 8825 nor the Schedule A includes an “other deductions” line to capture expenses not specified on draft Form 8825 or Schedule A. Instructions did not accompany the release of draft Form 8825 and Schedule A, leaving tax professionals to speculate what needs to be reported on the “[o]ther income related to real estate activity” line of Form 8825 and several of the other expenses on Schedule A. Presumably, for example, “[o]ther income related to rental real estate activity” relates to payment for services offered beyond the rental of space and “[t]urnover expenses” relate to expenses associated with lease terminations. Instructive guidance would be helpful.

The IRS also issued a draft of new Schedule 1-A for individuals who are eligible to claim certain deductions under OBBBA. Individual taxpayers will use this new schedule to calculate their modified adjusted gross income, which is then used to determine the amount they may be able to deduct for qualified tips, qualified overtime compensation, car loan interest and an enhanced deduction for seniors. The schedule will be attached to Form 1040, Form 1040-SR or Form 1040-NR.

Although the forms discussed in this communication are in draft form and, therefore, not required to be used at this time, it is likely that the forms will be finalized in time for the 2026 filing season.

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None of the authors is rendering legal, accounting or other professional advice. If such advice is required, it is strongly recommended that a professional advisor be engaged.

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