Updated October 16, 2026. Quick answer: Box 15 of Schedule K-1 (Form 1065) reports a partner’s share of the partnership’s tax credits, one code per kind of credit. The instructions send most of them to a credit form or to a line of Form 3800, Part III, and passive credits must also go through Form 8582-CR. Backup withholding in code O is the credit the instructions have you include in the total on Form 1040 or 1040-SR, line 25c.
What box 15 reports
Line 15 of Part III on the form is labelled Credits. Each credit gets its own code letter, and the instructions list the form that takes it. This page covers the partner’s side of a K-1 that was received. The other boxes are on the Schedule K-1 (Form 1065) boxes overview. For passive credits the instructions add a step: “If you have credits that are passive activity credits to you, you must complete Form 8582-CR (or Form 8810 for corporations) in addition to the credit forms identified below.”
The Form 3800 shortcut and its exceptions
Many credits end up on Form 3800. A partner who is not a partnership or S corporation can often skip the source credit form: “Generally, you aren’t required to complete the source credit form or attach it to Form 3800 if you’re a taxpayer that isn’t a partnership or S corporation, and your only source for a credit listed in Form 3800, Part III, is from a partnership, S corporation, estate, trust, or cooperative.” “Instead, you can report this credit directly in Form 3800, Part III, and enter the EIN of the partnership in column (c) of Part III.” The instructions then list exceptions. “The following exceptions apply.”
| Exception to the Form 3800 shortcut | As printed |
|---|---|
| Investment credit or fuels credit | “You’re claiming the investment credit (Form 3468) or the biodiesel, renewable diesel, or sustainable aviation fuels credit (Form 8864).” |
| Estate or trust | “The taxpayer is an estate or trust and the source credit can be allocated to beneficiaries.” |
| Cooperative | “The taxpayer is a cooperative and the source credit can or must be allocated to patrons.” |
For credits coded P through ZZ the default is Form 3800: “Most credits identified by codes P through ZZ will be reported on Form 3800 (see Tip, earlier).”
Box 15 codes and where each goes
The table gives the codes most partners hold. Each destination is the instruction’s own wording; the credit names are shortened. Codes not shown have their own instructions: most name a source form or a Form 3800, Part III line, but some, such as codes P to U (Form 3468) and AP to AU (Form 8912), name a different form.
| Code | Credit | Where the instructions send it |
|---|---|---|
| A | Zero-emission nuclear power production credit | “Report this amount on Form 7213, Nuclear Power Production Credit, Part II; or Form 3800, Part III, line 1u.” |
| C and D | Low-income housing credit | “Any allowable low-income housing credit reported using code C or D is reported on Form 8586, line 4; or Form 3800, Part III, line 4d.” |
| E | Qualified rehabilitation expenditures (rental real estate) | “See the Instructions for Form 3468 for details.” |
| F and G | Other rental credits | “These credits may be limited by the passive activity limitations.” |
| H | Undistributed capital gains credit | “Report these taxes on Schedule 3 (Form 1040), Part II, line 13a.” |
| I | Biofuel producer credit | “Report this amount on Form 6478, Biofuel Producer Credit, line 3; or Form 3800, Part III, line 4c” |
| M | Credit for increasing research activities | “Report this amount on Form 6765, Credit for Increasing Research Activities, line 29” |
| O | Backup withholding | “Include this amount in the total you enter on Form 1040 or 1040-SR, line 25c, and attach a copy of the Schedule K-1 to your tax return.” |
| Z | Orphan drug credit | “Report this amount on Form 8820; or Form 3800, Part III, line 1h.” |
| AD | New markets credit | “Report this amount on Form 8874; or Form 3800, Part III, line 1i.” |
| AE | Small employer pension plan startup costs credit and contributions credit | “Report this amount on Form 8881, Part I; or Form 3800, Part III, line 1j.” |
| AF | Small employer auto-enrollment credit | “Report this amount on Form 8881, Part II; or Form 3800, Part III, line 1dd.” |
Rehabilitation and rental real estate credits
Code E covers qualified rehabilitation expenditures for rental real estate. “The partnership will report your share of the qualified rehabilitation expenditures and other information you need to complete Form 3468 related to rental real estate activities using code E.” Rehabilitation outside rental real estate sits in box 20: “Your share of qualified rehabilitation expenditures from property not related to rental real estate activities will be reported in box 20 using code D.”
Both are combined for Form 3468, but kept apart on the K-1 for a reason. “Combine the expenditures (for Form 3468 reporting) from box 15, code E, and box 20, code D.” “because they’re subject to different passive activity limitation rules”. Rental income and expenses from the same partnership are covered on the Schedule E (Form 1040) page.
Passive credits and the order of limits
A credit from a passive activity cannot simply be taken. For an individual, “If you’re an individual, an estate, or a trust, and you have a passive activity loss or credit, use Form 8582, Passive Activity Loss Limitations, to figure your allowable passive losses; and Form 8582-CR, Passive Activity Credit Limitations, to figure your allowable passive credits.” Passive losses are explained on the Form 8582 page.
The overall rule for a partner with credits: “If you have an overall loss (the excess of deductions and losses, including any prior-year unallowed loss, over income) or credits from a passive activity”, “report the income, deductions, losses, and credits from all passive activities using the Instructions for Form 8582 or the Instructions for Form 8582-CR (or Form 8810)”.
A publicly traded partnership is treated separately, with two credit exceptions. “The passive activity limitations are applied separately for items (other than the low-income housing credit and the rehabilitation credit) from each PTP.”
The instructions list the limitations on partnership losses 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 Part III amounts are shown before any of that: “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”.
Losses that fail the at-risk test are covered on the Form 6198 page.
Research, backup withholding and section 6418 credits
Code M splits by business size: “The partnership will provide information necessary to determine if it’s an eligible small business under section 38(c)(5)(A).” “If you and the partnership are eligible small businesses, report the credit on line 4i.” “All others, report the credit on line 1c.”
Code O is a payment, not a credit earned by the activity: “This is your share of the credit for backup withholding on dividends, interest income, and other types of income.” “Instead of attaching a copy of the Schedule K-1 to the tax return, you can include a statement with the return that provides the partnership’s name, address, EIN, and backup withholding amount.” The Form 1040 itself is covered on the Form 1040 page.
For a partnership that made a transfer election, code ZZ can carry a retained credit: “If the partnership has made an election under section 6418 with regard to a section 48 credit and is using code ZZ to report your share of the credit which was not transferred by the partnership, report this amount on Form 3800, Part III, line 4a.” Code ZZ is also the catch-all: “Any other information you may need to file your tax return.”
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 code letters and the reporting lines.
Common mistakes
- Taking a passive credit directly on the return. The instructions say a passive activity credit means completing Form 8582-CR (or Form 8810 for corporations) in addition to the credit forms listed for the code.
- Filing the credit forms when Form 3800, Part III would do, or the reverse. The instructions allow a partner to report a credit directly in Form 3800, Part III with the partnership’s EIN, but the investment credit (Form 3468) and the Form 8864 fuels credit are exceptions.
- Forgetting that code O is the one credit tied to a K-1 attachment. The instructions say to attach a copy of the Schedule K-1 to the return, or include a statement with the partnership’s name, address, EIN, and backup withholding amount.
Related: Schedule K-1 (Form 1065) boxes explained, Form 8582 passive activity loss limits, Form 6198 at-risk limits, Schedule E (Form 1040), 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.