Schedule K-1 (Form 1065) Box 8: Short-Term Gain (2025)

Updated October 16, 2026. Quick answer: Box 8 of Schedule K-1 (Form 1065) is your share of the partnership’s net short-term capital gain or loss. The 2025 partner instructions say to report it on Schedule D (Form 1040), line 5, and they class it as portfolio income, which is outside the passive activity limitations. A loss is still held to the basis limit.

Schedule D and Schedule E (Form 1040) for 2025, read line by line: Schedule D lines 4 and 5 and Schedule D lines 11 and 12.

What box 8 reports

Part III box 8 carries the label “Net short-term capital gain (loss)”.

“The partnership uses Schedule K-1 to report your share of the partnership’s income, deductions, credits, etc.” “Keep it for your records.” “Don’t file it with your tax return unless you’re specifically required to do so.”

“Although the partnership generally isn’t subject to income tax, you may be liable for tax on your share of the partnership income, whether or not distributed.” “Include your share on your tax return if a return is required.”

This page covers one box. The full walk through every box on the schedule is on the Schedule K-1 (Form 1065) boxes page.

Where box 8 goes on your return

The brokerage reporting side of short-term and long-term gain is on the 1099-B box 2 page, and the schedule itself, including how gains and losses combine and what limits a net loss, is on the Schedule D page.

“If you’re an individual and the passive activity rules don’t apply to the amounts shown on your Schedule K-1, take the amounts shown and enter them on the appropriate lines of your tax return.” “If you aren’t an individual, report the amounts in each box as instructed on your tax return.”

“If the partnership reports a section 743(b) adjustment to partnership items, report these adjustments as separate items on Form 1040 or 1040-SR in accordance with the reporting instructions for the partnership item being adjusted.”

The year to report in depends on the partnership’s year end. “If you file your tax return on a calendar-year basis, but your partnership files a return for a fiscal year, report the amounts on your tax return for the year in which the partnership’s fiscal year ends.” “if the partnership’s tax year ends in February 2026, report the amounts on your 2026 tax return.”

Portfolio income and the passive limits

“Portfolio income or loss (shown in boxes 5 through 9b and in box 11, code A) isn’t subject to the passive activity limitations.” “Portfolio income includes income (not derived in the ordinary course of a trade or business) from interest, ordinary dividends, annuities or royalties, and gain or loss on the sale of property that produces such income or is held for investment.”

Gain or loss on the sale of property held for investment is named in that definition, which is why box 8 sits in the portfolio group and not with the rental boxes.

Sale of a partnership interest

The instructions add a note for partners who sold an interest. The caution under box 9 states: “If you sold an interest in the partnership, separate amounts of collectibles (28%) gain and unrecaptured section 1250 gain may be reported in box 20, under codes AC and AD.” A related code covers the ordinary portion. “Code AB. Section 751 gain (loss).” “Gain or loss from the disposition of your partnership interest may be net investment income (NII) under section 1411 and could be subject to the net investment income tax (NIIT).” That tax is explained on the NIIT page.

The limits that apply before it reaches the return

“There are potential limitations on partnership losses that you can deduct on your return.” The order is stated too: “the basis limitations, the at-risk limitations, the passive activity limitations, and the excess business loss limitations.”

A short-term capital loss is named in the basis rule. “Generally, a partner may only claim their share of a partnership loss (including a capital loss) to the extent it doesn’t exceed their adjusted basis in the partnership at the end of the partnership’s tax year.” “When basis is insufficient, and there is more than one category of loss or deduction items (for example, short-term capital loss and long-term capital loss) that reduces basis, the amount of each category of loss or deduction item that’s disallowed is determined on a pro rata basis.”

The at-risk rules come next. “Generally, if you have (a) a loss or other deduction from any activity carried on as a trade or business or for the production of income by the partnership, and (b) amounts in the activity for which you aren’t at risk, you’ll have to complete Form 6198, At-Risk Limitations, to figure your allowable loss for the activity.” The form is explained on the Form 6198 page. “The at-risk rules generally limit the amount of loss and other deductions that you can claim to the amount you could actually lose in the activity.”

The last limit applies to business losses. “Your distributive share of losses attributable to all of the partnership’s trades or businesses may be limited under section 461(l).” “See Form 461, Limitation on Business Losses, and its instructions for more information.”

Corrections and matching

If a figure on the schedule looks wrong, the instructions give one route. “If you believe the partnership has made an error on your Schedule K-1, notify the partnership and ask for a corrected Schedule K-1.” “Don’t change any items on your copy of Schedule K-1.”

Items must also match what the partnership reported, but the instructions tie that rule to the centralized partnership audit regime. “If you’re a partner in a partnership that hasn’t elected out of the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015 (the BBA), you must report the items shown on your Schedule K-1 (and any attached statements) the same way that the partnership treated the items on its return.” If your treatment on an original or amended return is inconsistent with the partnership’s, “you must file Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), with your original or amended return”.

“If you have losses, deductions, or credits from a prior year that weren’t deductible or usable because of certain limitations, such as the basis limitations or the at-risk limitations, take them into account in determining your net income, loss, or credits for this year.”

Which revision applies

The edition read for this page is the 2025 Partner’s Instructions for Schedule K-1 (Form 1065) together with the 2025 Schedule K-1 (Form 1065) itself, which are the revisions irs.gov served when they were read on 2026-10-16. Check the revision printed on the Schedule K-1 you received, because a later revision can change the box layout, the codes and the reporting lines.

Common mistakes

• Using the wrong Schedule D line. The instructions send box 8 to line 5 of Schedule D (Form 1040), and the long-term amount in box 9a to line 12.
• Deducting a short-term capital loss beyond basis. The instructions say a partner may only claim a share of a partnership loss, including a capital loss, to the extent it doesn’t exceed adjusted basis at the end of the partnership’s tax year.
• Forgetting that a sale of the interest can add items in box 20. The instructions say separate collectibles (28%) gain and unrecaptured section 1250 gain may be reported under codes AC and AD.

Related: Schedule D (Form 1040), 1099-B box 2 gain or loss, net investment income tax, and Form 1040.

Sources

• 2025 Partner’s Instructions for Schedule K-1 (Form 1065): https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf
• Schedule K-1 (Form 1065) (2025), Partner’s Share of Income, Deductions, Credits, etc.: https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf

Read from the IRS documents linked above on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.