Form 1065 Schedule K Lines 1 to 4 (2025)

Updated October 18, 2026. Quick answer: Schedule K lines 1 to 4 report the partnership’s ordinary business income, its rental real estate and other rental results, and guaranteed payments to partners. Line 1 comes from page 1, line 23. Line 2 comes from Form 8825, and lines 3 and 4 come from the partnership’s own records.

What Schedule K does

The instructions say “Schedule K is a summary schedule of all the partners’ shares of the partnership’s income, credits, deductions, etc.” and “All partnerships must complete Schedule K.” They explain the relationship to page 1: “Rental activity income (loss) and portfolio income aren’t reported on page 1 of Form 1065.” This page is part of the Form 1065 line-by-line walk-through.

Line 1: ordinary business income (loss)

The form caption is “Ordinary business income (loss) (page 1, line 23)”. The instructions say “Enter the amount from page 1, line 23.” They add “Enter the income (loss) without reference to (a) the bases of the partners’ interests in the partnership, (b) the partners’ at-risk limitations, or (c) the passive activity limitations.” and “These limitations, if applicable, are determined at the partner level.” Line 1 also has a boundary: “Line 1 shouldn’t include rental activity income (loss) or portfolio income (loss).” Page 1 line 23 itself is on the lines 19 to 23 page.

Line 2: net rental real estate income (loss)

The form caption is “Net rental real estate income (loss) (attach Form 8825)”. The instructions say “Enter the net income (loss) from rental real estate activities of the partnership from Form 8825. Attach this form to Form 1065.” The partner-side box is explained at Schedule K-1 box 2.

Line 3: other net rental income (loss)

The form has three captions: “Other gross rental income (loss)” on line 3a, “Expenses from other rental activities (attach statement)” on line 3b, and “Other net rental income (loss). Subtract line 3b from line 3a.” on line 3c.

The instructions say “Enter on line 3a gross income from rental activities other than those reported on Form 8825.” They continue: “Include on line 3a gain (loss) from Form 4797, line 17, that is attributable to the sale, exchange, or involuntary conversion of an asset used in a rental activity other than a rental real estate activity.” For the other two lines: “Enter on line 3b the deductible expenses of the activity. Attach a statement of these expenses to Form 1065.” and “Enter on line 3c the net income (loss).” Form 4797 is covered at Form 4797.

Line 4: guaranteed payments to partners

The form splits line 4 into services (4a), capital (4b) and a total that says “Add lines 4a and 4b”. The instructions define the term: “Guaranteed payments are payments made by a partnership to a partner that are determined without regard to the partnership’s income.” One example they give is “Payments for salaries, health insurance, and interest deducted by the partnership and reported on Form 1065, page 1, line 10; Form 8825; or Schedule K, line 3b;” The page 1 side is on the lines 9 and 10 page.

On passive treatment the instructions say “guaranteed payments for personal services paid to a partner would not be passive activity income” and “Likewise, guaranteed payments for capital are treated as interest for purposes of section 469 and are generally not passive activity income.” For the partner copy, “Enter each partner’s guaranteed payments for services in box 4a and guaranteed payments for use of capital in box 4b of Schedule K-1.” See Schedule K-1 box 4.

Where the number comes from

Line 1 is copied from page 1, line 23, and line 2 from Form 8825. Lines 3a and 3b come from the partnership’s own records of rental activities other than those on Form 8825, with the expenses listed on an attached statement, and line 3c is the difference the form describes. Line 4 comes from the amounts the partnership paid to partners without regard to its income. The partner’s share of line 1 goes to Schedule K-1 box 1.

Where it goes next

The instructions say for line 1, “Enter each partner’s distributive share of ordinary business income (loss) in box 1 of Schedule K-1.” The analysis page of the return then starts from the Schedule K totals: “Combine Schedule K, lines 1 through 11.” See the analysis of net income (loss) and lines 5 to 11 for the next Schedule K lines.

Edition and line numbers

This page reads the 2025 Form 1065 and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are the files for the tax year 2025 return, filed in 2026. Form 1065 has no attach-to caption, so check the form’s own title and header instead. The title line reads “U.S. Return of Partnership Income” and the header reads “For calendar year 2025, or tax year beginning”. Check the tax year printed on the form you are filling in and use that year’s line numbers, because a different year’s form can number or word its lines differently.

Common mistakes

• Putting rental income into line 1. The instructions say “Line 1 shouldn’t include rental activity income (loss) or portfolio income (loss).”
• Applying partner-level limits on the partnership return. The instructions say “These limitations, if applicable, are determined at the partner level.”
• Leaving the line 3b expenses unexplained. The instructions say “Attach a statement of these expenses to Form 1065.”

Related: Form 1065, Schedule K-1 box 1, Schedule K-1 box 2, Schedule K-1 box 4, and Form 4797.

Sources

• Instructions for Form 1065, U.S. Return of Partnership Income (2025): https://www.irs.gov/pub/irs-pdf/i1065.pdf
• Form 1065, U.S. Return of Partnership Income (2025): https://www.irs.gov/pub/irs-pdf/f1065.pdf

Read from the IRS documents linked above on October 18, 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.