Updated October 7, 2026. Quick answer: Form 8621 is the information return a U.S. shareholder of a passive foreign investment company (PFIC) files for each PFIC, most often because of a foreign mutual fund or ETF. A foreign corporation is a PFIC if 75% or more of its gross income is passive or at least 50% of its assets produce passive income. Without an election, a distribution above 125% of the three-year average and any gain on sale are taxed under section 1291 with an interest charge. Part I has a $25,000 exception ($50,000 on a joint return).
Schedule 2 (Form 1040) for 2025, read line by line: Schedule 2 lines 17l to 17q and Schedule 2 lines 17z and 18.
Related reading on this site: FBAR deadline 2027.
More IRS forms and schedules, read line by line: Form 8865 instructions, Form 8938 instructions and Form 3520 instructions.
More IRS forms and schedules, read line by line: Form 5471 instructions.
What Form 8621 is and who files it
The IRS titles the form as the “Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund”. The filing rule is tied to events, not just ownership: “Generally, a U.S. person that is a direct or indirect shareholder of a PFIC must file Form 8621 for each tax year under the following five circumstances if the U.S. person:”
- “Receives certain direct or indirect distributions from a PFIC,”
- “Recognizes gain on a direct or indirect disposition of PFIC stock,”
- “Is reporting information with respect to a Qualified Electing Fund (QEF) or section 1296 mark-to-market election,”
- “Is making an election reportable in Part II of the form, or”
- “Is required to file an annual report pursuant to section 1298(f).”
Each fund is reported separately: “A separate Form 8621 must be filed for each PFIC in which stock is held directly or indirectly.” The form goes in with the return: “Attach Form 8621 to the shareholder’s tax return” and file both by the due date, including extensions. Foreign tax on PFIC distributions can interact with Form 1116 as covered below.
What makes a foreign corporation a PFIC
The instructions give two tests and say “A foreign corporation is a PFIC if it meets either the income or asset test described next.”
The income test: “75% or more of the corporation’s gross income for its tax year is passive income”. The asset test: “At least 50% of the average percentage of assets” held during the year “are assets that produce passive income or that are held for the production of passive income.”
A holding company can be caught through what it owns: “the foreign corporation is treated as if it directly held its proportionate share of the assets and directly received its proportionate share of the income of any corporation in which it owns at least 25% of the stock (by value).” A foreign mutual fund or ETF that is organized as a foreign corporation and holds mostly investment assets can meet one of these tests, which is why funds are the usual way individuals end up filing.
The three regimes: section 1291, QEF, mark-to-market
Which regime applies decides which Part of the form carries the numbers.
| Regime | How you land there | Where it is reported |
|---|---|---|
| Section 1291 fund (default) | No QEF or mark-to-market election, or an unpedigreed QEF | Excess distributions and gain on sale, plus an interest charge (Part V) |
| Qualified electing fund (QEF) | Election A, with annual statements from the PFIC | Pro rata share of ordinary earnings and net capital gain each year (Part III) |
| Mark-to-market | Election C, marketable stock only | Year-end gain is ordinary income, loss is limited (Part IV) |
The default regime is defined by what was not done: a PFIC is a section 1291 fund if “The shareholder did not elect to treat the PFIC as a QEF or make a mark-to-market election with respect to the PFIC, or” it is an unpedigreed QEF. A QEF shareholder “must annually include in gross income, as ordinary income, its pro rata share of the ordinary earnings of the QEF and as long-term capital gain its pro rata share of the net capital gain of the QEF.”
Mark-to-market is limited to stock the instructions call marketable: “PFIC stock that is regularly traded” on a national securities exchange registered with the SEC, the national market system, or a qualifying foreign securities exchange. A QEF election also depends on the fund cooperating, because “the PFIC must provide the shareholders with a PFIC Annual Information Statement.”
Excess distributions and the interest charge
Under section 1291, the problem distribution is defined by a ratio: “An excess distribution is the part of the distribution received from a section 1291 fund in the current tax year that is greater than 125% of the average distributions received in respect of such stock by the shareholder during the 3 preceding tax years”. A sale is treated the same way: “The entire amount of gain from the disposition of a section 1291 fund is treated as an excess distribution.”
The form lays the arithmetic out in Part V: line 15c is “Divide line 15b by 3.0.” and line 15d is “Multiply line 15c by 125% (1.25)”. The following is an illustration with made-up amounts, not an IRS example:
| Form line | Amount | Source of the number |
|---|---|---|
| Line 15a: distributions this year | $2,000 | Illustration |
| Line 15b: distributions, 3 prior years combined | $3,000 | Illustration |
| Line 15c: line 15b divided by 3 | $1,000 | Computed here |
| Line 15d: line 15c times 125% | $1,250 | Computed here |
| Line 15e(1): line 15a minus line 15d | $750 | Excess distribution, computed here |
| Nonexcess distribution: lesser of 15a or 15d | $1,250 | Computed here |
In the illustration, the three prior years total $3,000 and so the average is $1,000 and the 125% threshold is $1,250. Of a $2,000 distribution, $1,250 is a nonexcess distribution and $750 is the excess. The first-year rule can remove the problem entirely: “No part of a distribution received or deemed received during the first tax year of the shareholder’s holding period of the stock will be treated as an excess distribution.”
The excess is spread over the holding period. Portions for the current year and pre-PFIC years “are taxed as ordinary income.” Portions for earlier PFIC years “are not included in income, but are subject to the separate tax and interest charge set forth in section 1291(c).” For those years, the increase in tax uses the top rate for each year, which the table in the instructions gives as 37% for 2018 through 2025. Interest runs “for the period beginning on the due date (without regard to extensions) of your income tax return for the tax year to which an increase in tax is attributable” and uses section 6621 rates.
Parts I to VI, in order
The 2025 form has six Parts. A walk through them:
- Part I, Summary of Annual Information. Lines 1 to 5 describe the shares: class, date acquired, number held at year end, value at year end, and the type of PFIC with any amount under sections 1291, 1293 or 1296. On value, “Shareholders may rely upon periodic account statements provided at least annually to determine the value of a PFIC” unless they know the statements are unreasonable.
- Part II, Elections. Boxes A to H cover the QEF election, the extension of time to pay, mark-to-market, and the deemed sale and deemed dividend elections. Election A needs a separate election for each PFIC, and the instructions say “A separate election must be made for each PFIC that the shareholder wants to treat as a QEF.”
- Part III, Income From a QEF. “All QEF shareholders complete lines 6a through 7c.” Line 6c is ordinary income reported as other income on Schedule 1, line 8z, and line 7c goes to Schedule D (see the Schedule D page).
- Part IV, Section 1296 mark-to-market. Lines 10a to 12 handle stock held at year end and lines 13a to 14c handle stock sold.
- Part V, Section 1291 funds. Lines 15a to 15f compute the excess distribution or the gain, and line 16 computes the tax and interest, with a separate statement attached.
- Part VI, Section 1294 elections. Lines 17 to 26 report the status and termination of an extension-of-payment election.
Exceptions to completing Part I
Small positions get relief from Part I only, not from every obligation. The instructions say “A shareholder is exempt from completing Part I if it meets one of the exceptions described below.”
| Part I exception tested on | Threshold printed in the instructions |
|---|---|
| Aggregate PFIC stock held directly or indirectly, single filer | $25,000 or less on the last day of the tax year |
| Aggregate PFIC stock, joint return | $50,000 or less (combined threshold) |
| Proportionate share of an indirectly held section 1291 fund | $5,000 or less |
The direct threshold carries a condition: “A shareholder is not required to complete Part I with respect to a specific section 1291 fund if the shareholder meets the $25,000 exception on the last day of the shareholder’s tax year and the shareholder does not receive an excess distribution from, or recognize gain on the sale or disposition of the stock of, the section 1291 fund.” Joint filers have a “combined threshold of $50,000 instead of $25,000”. PFIC stock held in retirement vehicles is treated differently: a U.S. person who owns PFIC stock through an individual retirement plan or annuity, a section 529 plan or the other listed accounts “is not treated as a shareholder of the PFIC.”
Related foreign-asset reports
Form 8621 is not the only foreign reporting form. The instructions include a box for a filer who also files Form 8938: “Check this box only if the Form 8621 filer also files Form 8938, Statement of Specified Foreign Financial Assets, for the tax year”. Reporting a fund on Form 8621 does not replace a Form 8938 or an FBAR where those apply, and the rules differ; see the FBAR versus Form 8938 page. Foreign withholding on fund distributions is shown on the forms discussed at the 1099-DIV page and the 1099-INT page, and the instructions treat the credit for tax on an excess distribution under line 16d.
Which revision applies
The edition read for this page is the Instructions for Form 8621 (Rev. December 2025), which is the revision irs.gov served when it was read on 2026-10-07. A later revision can change line numbers or thresholds, so check the revision printed on the form you are filing. “For the latest information about developments relating to Form 8621 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form8621.” The December 2025 edition adds a three-letter currency code above line 15a and a new line 15e(2) for the U.S. dollar amount.
Common mistakes
- Treating a foreign mutual fund or ETF as an ordinary 1099 item. A fund that is a foreign corporation can be a PFIC, and a separate Form 8621 is required for each one.
- Reading the $25,000 exception as a full exemption. It excuses Part I only, and not if there was an excess distribution or a gain on sale of the section 1291 fund that year.
- Treating the QEF election as automatic. It is a separate election for each PFIC, and it depends on the PFIC providing an annual information statement.
Related: Form 1116 foreign tax credit, FBAR versus Form 8938, Form 8960 net investment income tax, and foreign source capital gains.
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Answer againSources
- Instructions for Form 8621 (Rev. December 2025): https://www.irs.gov/pub/irs-pdf/i8621.pdf
- Form 8621 (Rev. December 2025): https://www.irs.gov/pub/irs-pdf/f8621.pdf
Read from the IRS documents linked above on October 7, 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.