Updated October 16, 2026. Quick answer: Box 12 of Schedule K-1 (Form 1065) is a partner’s share of the partnership’s section 179 expense deduction. The 2025 instructions have the partner use it, with section 179 property from other sources, to complete Part I of Form 4562, and then carry the allowed amount to Schedule E, line 28, column (j), unless the passive rules apply.
Sales of business property (Form 4797), passive activity losses (Form 8582) and depreciation (Form 4562) for 2025, read line by line: Form 4562 lines 1 to 5, Form 4562 lines 6 to 13 and Form 4562 lines 21 to 23.
What box 12 reports
On the form, line 12 of Part III is labelled “Section 179 deduction”. The instructions open the box with one sentence about how to use it: “Use this amount, along with the total cost of section 179 property placed in service during the year from other sources, to complete Part I of Form 4562, Depreciation and Amortization.” This page covers the partner’s side of a K-1 you received; it does not cover how the partnership files its own return. Every other box is set out on the Schedule K-1 (Form 1065) boxes overview.
Form 4562 is the form where the deduction is figured and limited. It is explained on the Form 4562 page.
Where box 12 goes on your return
The path runs through Form 4562, Part I, and then splits on the passive question. For an individual the landing spot is Schedule E (Form 1040), line 28.
| Situation | Where the instructions send it |
|---|---|
| Part of the amount allocable to a passive activity | “Report the amount from Form 4562, Part I, line 12, allocable to a passive activity using the Instructions for Form 8582.” |
| Not a passive activity deduction | “If the amount isn’t a passive activity deduction, report it in column (j) of Schedule E (Form 1040), line 28.” |
| Item D (PTP) is checked | “However, if the box in item D of Schedule K-1 is checked, report this amount following the rules for PTPs under Publicly traded partnerships, earlier.” |
| Qualified enterprise zone or qualified real property | “The partnership will report on an attached statement your allowable share of the cost of any qualified enterprise zone or qualified real property it placed in service during the tax year.” |
Passive amounts are worked out on Form 8582.
The limits that apply to a section 179 deduction
The deduction has its own limit that applies first. “Other limitations may apply to specific deductions (for example, the section 179 expense deduction).” “Generally, specific limitations apply before the at-risk and passive loss limitations.”
After that comes the at-risk test. “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.” “These losses and deductions include a loss on the disposition of assets and the section 179 expense deduction.” The test is figured on Form 6198.
The instructions list four limits and put them in a fixed order: “These limitations and the order in which you must apply them are as follows: the basis limitations, the at-risk limitations, the passive activity limitations, and the excess business loss limitations.” The amounts printed in Part III are before any of them. “The amounts shown in boxes 1 through 21 reflect your share of income, loss, deductions, credits, and other items from partnership business or rental activities without reference to limitations on losses or adjustments that may be required of you”.
Basis and the deduction you could not use
A section 179 deduction that is limited this year does not vanish from the basis calculation. On the partner basis worksheet the instructions say: “Include your share of the partnership’s section 179 expense deduction for the year even if you can’t deduct all of it due to limitations.”
Basis is the partner’s own job to track. “Any losses and deductions not allowed can be carried forward.” “It’s the partner’s responsibility to track and maintain the information necessary to figure their adjusted basis in the partnership (also known as outside basis).”
Where the same deduction appears elsewhere on the K-1
Box 12 is not the only place section 179 surfaces. Three cross references are worth knowing.
| Where the deduction shows up again | As printed |
|---|---|
| Box 14, code A | “If you’re a general partner, reduce this amount before entering it on Schedule SE (Form 1040) by any section 179 expense deduction claimed” |
| Box 20, code L | “Dispositions of property with section 179 deductions” |
| Box 20, code M | “The partnership will report your share of any recapture of the section 179 expense deduction if business use of any property for which the section 179 expense deduction was passed through to partners dropped to 50% or less.” |
The code L disposition rules also say how the deduction is used when the property is sold: “If the partnership passed through a section 179 expense deduction for the property, you must report the gain or loss and any recapture of the section 179 expense deduction for the property on your income tax return (see the Instructions for Form 4797 for details).” That form is covered on the Form 4797 page.
The code M recapture rule adds that the partnership must give the partner the depreciation allowed or allowable, not counting the section 179 deduction, and the share of the deduction passed through, reduced by “the portion, if any, of your unused (carryover) section 179 expense deduction for this property”.
Which revision applies
The edition read for this page is the 2025 Partner’s Instructions for Schedule K-1 (Form 1065) and 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 and the matching instructions, because a later edition can change the box layout, the column letters and the reporting lines.
Common mistakes
- Entering the box 12 amount straight on Schedule E. The instructions say to use it, with the cost of section 179 property from other sources, to complete Part I of Form 4562, and to report the Form 4562 line 12 amount that is allocable to a passive activity using the Form 8582 instructions.
- Forgetting that a general partner reduces self-employment earnings. The box 14 instructions say to reduce the code A amount by any section 179 expense deduction claimed before it goes on Schedule SE.
- Dropping the unused amount from the basis worksheet. The instructions say to include the partnership’s section 179 share for the year even if the partner cannot deduct all of it due to limitations.
Related: Form 4562 depreciation and amortization, Form 8582 passive activity loss limits, Form 6198 at-risk limits, Schedule E (Form 1040), and Schedule K-1 (Form 1065) boxes explained.
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.