Updated October 16, 2026. Quick answer: Form 6198 is the at-risk limitations form. The instructions say “The at-risk rules of section 465 limit the amount of the loss you can deduct to the amount at risk.” They also say “File Form 6198 if during the tax year you, a partnership in which you were a partner, or an S corporation in which you were a shareholder had any amounts not at risk” invested in an activity that incurred a loss. The form is attached to your tax return, and Parts I to IV take you from the activity’s profit or loss to the loss you can deduct.
Related reading on this site: IRS Publication 925.
Schedule D and Schedule E (Form 1040) for 2025, read line by line: Schedule E lines 20 to 22, Schedule E lines 23a to 26 and Schedule E lines 38 to 43.
The shareholder’s Schedule K-1 (Form 1120-S), boxes 13 to 19: Schedule K-1 boxes 18 and 19.
The shareholder’s Schedule K-1 (Form 1120-S), read box by box: Schedule K-1 box 2, Schedule K-1 box 3 and Schedule K-1 box 9.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 12, Schedule K-1 box 15 and Schedule K-1 box 20 N AE AF.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 1, Schedule K-1 box 3 and Schedule K-1 box 7.
What Form 6198 is and who files it
The form is titled “At-Risk Limitations” and its header says “Attach to your tax return.” The instructions list three jobs for it: “The profit (loss) from an at-risk activity for the current year (Part I),” “The amount at risk for the current year (Part II or Part III), and” “The deductible loss for the current year (Part IV).”
The purpose line sums up the rule: “The at-risk rules of section 465 limit the amount of the loss you can deduct to the amount at risk.”
On who files, the text reads: “Form 6198 is filed by individuals (including filers of Schedules C, E, and F (Form 1040 or 1040-SR)), estates, trusts, and certain closely held C corporations”. The trigger is: “File Form 6198 if during the tax year you, a partnership in which you were a partner, or an S corporation in which you were a shareholder had any amounts not at risk (see Amounts Not at Risk, later) invested in an at-risk activity (defined below) that incurred a loss.”
The filer list above names Schedule C, E and F filers. The sale side of a loss is reported on Schedule D or Form 4797, and the instructions name both on line 2.
Activities covered
“The at-risk limitation rules apply to losses from the following activities carried on as a trade or business or for the production of income.” The list as printed:
| Item | As printed in the instructions |
|---|---|
| 1 | “Holding, producing, or distributing motion picture films or videotapes.” |
| 2 | “Farming, as defined in section 464(e).” |
| 3 | “Leasing any section 1245 property, as defined in section 1245(a)(3).” |
| 4 | “Exploring for or exploiting oil and gas resources.” |
| 5 | “Exploring for or exploiting geothermal deposits, as defined in section 613(e)(2).” |
| 6 | “Any other activity that is not included in (1) through (5) above.” |
One exception is spelled out: holding real property placed in service before 1987, and holding an interest acquired before 1987 in a partnership, an S corporation, or other pass-through entity already engaged in an activity of holding real property before 1987, are “not affected by the at-risk rules.” The instructions add “This exception does not apply to holding mineral property.”
Amounts at risk and amounts not at risk
The instructions begin from the negative: “You are not considered at risk for any of the following.”
First, loans without personal liability. “Nonrecourse loans used to finance the activity, to acquire property used in the activity, or to acquire your interest in the activity (unless the nonrecourse loan is secured by your own property that is not used in the activity).” “However, you are considered at risk for qualified nonrecourse financing secured by real property used in the activity of holding real property (other than mineral property).”
Second, protected money. “Cash, property, or borrowed amounts used in the activity that are protected against loss by a guarantee, stop-loss agreement, or other similar arrangement (excluding casualty insurance and insurance against tort liability).”
Third, certain related-party borrowing, meaning amounts borrowed for use in the activity from a person with a stake in it. The instructions describe the lender as one who “has an interest in the activity other than as a creditor or who is related under section 465(b)(3)(C) to a person (except you) having such an interest.” The instructions then list exceptions to that rule and refer readers to Publication 925 for definitions.
Qualified nonrecourse financing
This is the exception that lets some nonrecourse debt count. The instructions define it: “Qualified nonrecourse financing is financing for which no one is personally liable for repayment and is:”
| Test | As printed |
|---|---|
| a | “Borrowed by you in connection with holding real property;” |
| b | “Secured by real property used in the activity;” |
| c | “Not convertible debt; and” |
| d | “Loaned or guaranteed by any federal, state, or local government, or borrowed by you from a qualified person” |
For details the instructions send readers to “Regulations section 1.465-27”.
Part I to Part IV walk
The form has four parts. The headings and key lines are printed on the form itself:
| Part | What the form says |
|---|---|
| Part I | “Current Year Profit (Loss) From the Activity, Including Prior Year Nondeductible Amounts.” Line 5 is “Current year profit (loss) from the activity. Combine lines 1 through 4.” |
| Part II | “Simplified Computation of Amount at Risk.” It ends with line 10b, “If line 10a is more than zero, enter that amount here and go to line 20 (or complete Part III).” |
| Part III | “Detailed Computation of Amount at Risk.” It ends with line 19b, “If line 19a is more than zero, enter that amount here and go to line 20.” |
| Part IV | “Deductible Loss”. Line 20 is “Amount at risk. Enter the larger of line 10b or line 19b”. |
Part I starts from the activity’s result. A profit on line 5 is handled lightly: “If line 5 shows a current year profit, you may not have to complete the rest of this form.”
Part II versus Part III is a choice of method. “Part II is a simplified method of figuring your amount at risk.” “Part III is a longer method of figuring your amount at risk, which may allow a larger amount at risk.”
Part IV is the comparison. The form says “Deductible loss. Enter the smaller of the line 5 loss (treated as a positive number) or line 20.” The instructions give examples, and two of them are shown here:
| Case | Example as printed in the instructions |
|---|---|
| (a) | “If line 5 is a loss of $400 and line 20 is $1,000, enter ($400) on line 21.” |
| (b) | “If line 5 is a loss of $1,600 and line 20 is $1,200, enter ($1,200) on line 21.” |
When several items make up the loss, the instructions split it by fraction and then say “The remaining portion of each deduction or loss item from the activity is disallowed and must be carried over to next year.”
Basis, the amount at risk and recapture
Basis is the starting point of the simplified method. Line 6 asks for “Adjusted basis (as defined in section 1011) in the activity (or in your interest in the activity) on the first day of the tax year. Do not enter less than zero”. For sole proprietors the instructions add “must not reduce the amount on this line by any liabilities.”
A zero result has a consequence. “If the amount on line 10b is zero, you may be subject to the recapture rules. See Pub. 925.”
The link to the passive activity rules, and which revision applies
At-risk is one limit among several. The form’s closing note reads: “If the loss is from a passive activity, see the Instructions for Form 8582, Passive Activity Loss Limitations”, and the note continues with “If only part of the loss is subject to the passive activity loss rules, report only that part on Form 8582 or Form 8810, whichever applies.”
The instructions repeat the layering at Part IV: “If the loss on line 5 is equal to or less than the amount on line 20, report the items in Part I in full on your return, subject to any other limitations such as the passive activity and capital loss limitations.” See the Form 8582 page for the passive loss form itself.
The instructions also say “Complete the rest of the form to see how much, if any, of the excess loss can be deducted.” Rental income and its losses are covered on the Schedule E page, and the net investment income form is on the Form 8960 page.
The edition read for this page is Form 6198 (Rev. November 2025) and the Instructions for Form 6198 (Rev. 11-2025), which are the revisions irs.gov served when they were read on 2026-10-16. A later revision can change the line layout and the wording, so check the revision printed on the form you are filing.
Common mistakes
- Treating every borrowed dollar as at risk. The instructions say you are not at risk for nonrecourse loans, for amounts protected by a guarantee or stop-loss arrangement, and for certain related-party borrowing, with qualified nonrecourse financing on real property as the stated exception.
- Skipping Part IV after a loss because Part II looks complete. The form says the deductible loss is the smaller of the line 5 loss or line 20, and a disallowed remainder must be carried over to next year.
- Stopping at the at-risk result. The instructions say the items are reported subject to any other limitations such as the passive activity and capital loss limitations, and the form points passive losses to Form 8582.
Related: Form 8582, Schedule E (Form 1040), Schedule D (Form 1040), Form 4797, and Form 8960.
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- Form 6198 (Rev. November 2025), At-Risk Limitations: https://www.irs.gov/pub/irs-pdf/f6198.pdf
- Instructions for Form 6198 (Rev. November 2025): https://www.irs.gov/pub/irs-pdf/i6198.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.