Part III. Beneficiary’s Share of Current Year

Income, Deductions, Credits, and Other Items

Box 1—Interest

Enter the beneficiary’s share of the taxable interest income minus allocable deductions.

Box 2a—Total Ordinary Dividends

Enter the beneficiary’s share of ordinary dividends minus allocable deductions.

Box 2b—Total Qualified Dividends

Enter the beneficiary’s share of qualified dividends minus allocable deductions.

Box 3—Net Short-Term Capital Gain

Enter the beneficiary’s share of the net short-term capital gain from column (1) of Schedule D (Form 1041), line 17,

minus allocable deductions. Don’t enter a loss in box 3. If, for the final year of the estate or trust, there is a capital loss carryover, enter in box 11, code C, the beneficiary’s share of short-term capital loss carryover. However, if the beneficiary is a corporation, enter in box 11, code C, the beneficiary’s share of all short- and long-term capital loss carryovers as a single item. See section 642(h) and related regulations for more information.

Boxes 4a Through 4c—Net Long-Term Capital Gain

Enter the beneficiary’s share of the net long-term capital gain from column (1) of Schedule D (Form 1041), lines 18a through 18c, minus allocable deductions.

Don’t enter a loss in boxes 4a through 4c. If, for the final year of the estate or trust, there is a capital loss carryover, enter in box 11, code D, the beneficiary’s share of the long-term capital loss carryover. (If the beneficiary is a corporation, see the instructions for box 3.) See section 642(h) and related regulations for more information.

Gains or losses from the complete or partial disposition of a rental, rental real estate, or a trade or business activity that is a passive activity must be shown on an attachment to Schedule K-1.

Box 5—Other Portfolio and Nonbusiness Income

Enter the beneficiary’s share of annuities, royalties, or any other income, minus allocable deductions (other than directly apportionable deductions), that isn’t subject to any passive activity loss limitation rules at the beneficiary level. Use boxes 6 through 8 to report income items subject to the passive activity rules at the beneficiary’s level.

Boxes 6 Through 8—Ordinary Business Income, Rental Real Estate, and Other Rental Income

Enter the beneficiary’s share of trade or business, rental real estate, and other rental income, minus allocable deductions (other than directly apportionable deductions). To assist the beneficiary in figuring any applicable passive activity loss limitations, also attach a separate schedule showing the beneficiary’s share of income derived from each trade or business, rental real estate, and other rental activity.

Box 9—Directly Apportioned Deductions

Caution: The limitations on passive activity losses and credits under section 469 apply to estates and trusts. Estates and trusts that distribute income to beneficiaries are allowed to apportion depreciation, depletion, and amortization deductions to the beneficiaries. These deductions are referred to as “directly apportionable deductions.”

Rules for treating a beneficiary’s income and directly apportionable deductions from an estate or trust and other rules for applying the passive loss and credit limitations to beneficiaries of estates and trusts haven’t yet been issued.

Any directly apportionable deduction, such as depreciation, is treated by the beneficiary as having been incurred in the same activity as incurred by the estate or trust. However, the character of such deduction may be determined as if the beneficiary incurred the deduction directly.

Instructions for Form 1041 (2025) 45

To assist the beneficiary in figuring any applicable passive activity loss limitations, also attach a separate schedule showing the beneficiary’s share of directly apportionable deductions derived from each trade or business, rental real estate, and other rental activity.

Enter the beneficiary’s share of directly apportioned deductions using codes A through C.

Depreciation (code A). Enter the beneficiary’s share of the depreciation deductions directly apportioned to each activity reported in boxes 5 through 8. See Depreciation, Depletion, and Amortization, earlier, for a discussion of how the depreciation deduction is apportioned between the beneficiaries and the estate or trust. Report any AMT adjustment or tax preference item attributable to depreciation separately in box 12, using code G.

Note: An estate or trust can’t make an election under section 179 to expense certain depreciable business assets.

Depletion (code B). Enter the beneficiary’s share of the depletion deduction under section 611 directly apportioned to each activity reported in boxes 5 through 8. See Depreciation, Depletion, and Amortization, earlier, for a discussion of how the depletion deduction is apportioned between the beneficiaries and the estate or trust. Report any tax preference item attributable to depletion separately in box 12, using code H.

Amortization (code C). Itemize the beneficiary’s share of the amortization deductions directly apportioned to each activity reported in boxes 5 through 8. Apportion the amortization deductions between the estate or trust and the beneficiaries in the same way that the depreciation and depletion deductions are divided. Report any AMT adjustment attributable to amortization separately in box 12, using code I.

Box 10—Estate Tax Deduction (Including Certain Generation-Skipping Transfer Taxes)

If the distribution deduction consists of any IRD, and the estate or trust was allowed a deduction under section 691(c) for the estate tax paid attributable to such income (see the line 19 instructions), then the beneficiary is allowed an estate tax deduction in proportion to their share of the distribution that consists of such income. For an example of the computation, see Regulations section 1.691(c)-2. Figure the computation on a separate sheet and attach it to the return.

Box 11, Code A—Excess Deductions on Termination—Section 67(e) Expenses

If this is the final return of the estate or trust, and there are excess deductions on termination (see the instructions for line 23), enter the beneficiary’s share of excess deductions for section 67(e) expenses (amounts allowed in arriving at AGI) in box 11, using code A. See Final Regulations - TD9918 for examples of allowable excess deductions on termination of an estate or trust.

Note: The beneficiary may deduct the excess deductions shown in box 11, code A, as an adjustment to income on Schedule 1 (Form 1040), Part II, line 24k.

Excess deductions on termination occur only during the last tax year of the trust or decedent’s estate when the total

deductions (excluding the charitable deduction and exemption) are greater than the gross income during that tax year.

Generally, a deduction based on an NOL carryover isn’t available to a beneficiary as an excess deduction. However, if the last tax year of the estate or trust is also the last year in which an NOL carryover may be taken (see section 172(b)), the NOL carryover is considered an excess deduction on the termination of the estate or trust to the extent it isn’t absorbed by the estate or trust during its final tax year. For more information, see Regulations section 1.642(h)-4 for a discussion of the allocation of the carryover among the beneficiaries.

Only the beneficiary of an estate or trust that succeeds to its property is allowed to deduct that entity’s excess deductions on termination. A beneficiary who doesn’t have enough income in that year to absorb the entire deduction can’t carry the balance over to any succeeding year.

Box 11, Code B—Excess Deductions on Termination—Non-Miscellaneous Itemized Deductions

If this is the final return of the estate or trust, and there are excess deductions on termination (see the instructions for line 23), enter the beneficiary’s share of excess deductions for non-miscellaneous itemized deductions in box 11, using code B. Figure the deductions on a separate sheet and attach it to the return.

An individual beneficiary must be able to itemize deductions in order to claim excess deductions that are non-miscellaneous itemized deductions in determining taxable income.

Note: Section 67(g) suspends miscellaneous itemized deductions subject to the 2% floor for tax years 2018 through 2025. Therefore, miscellaneous itemized deductions are not deductible as excess deductions on termination of an estate or trust. Consult your state taxing authority for information about deducting miscellaneous itemized deductions on your state tax return.

Box 11, Codes C and D—Unused Capital Loss Carryover

Upon termination of the trust or decedent’s estate, the beneficiary succeeding to the property is allowed as a deduction any unused capital loss carryover under section 1212. If the estate or trust incurs capital losses in the final year, use the Capital Loss Carryover Worksheet in the Instructions for Schedule D (Form 1041) to figure the amount of capital loss carryover to be allocated to the beneficiary.

Box 11, Codes E and F—NOL Carryover

Upon termination of a trust or decedent’s estate, a beneficiary succeeding to its property is allowed to deduct any unused NOL (and any alternative tax NOL) carryover for regular and AMT purposes if the carryover would be allowable to the estate or trust in a later tax year but for the termination. Enter in box 11, using codes E and F, the unused carryover amounts.

46 Instructions for Form 1041 (2025)

Box 12—AMT Items

Adjustment for minimum tax purposes (code A). Enter the beneficiary’s share of the adjustment for minimum tax purposes.

To figure the adjustment, subtract the beneficiary’s share of the income distribution deduction figured on Schedule B, line 15, from the beneficiary’s share of the income distribution deduction on a minimum tax basis figured on Schedule I (Form 1041), line 42. The difference is the beneficiary’s share of the adjustment for minimum tax purposes.

Note: Schedule B, line 15, equals the sum of boxes 1, 2a, 3, 4a, 5, 6, 7, and 8 of all Schedules K-1.

AMT adjustment attributable to qualified dividends, net short-term capital gains, or net long-term capital gains (codes B through D). If any part of the amount reported in box 12, code A, is attributable to qualified dividends (code B), net short-term capital gain (code C), or net long-term capital gain (code D), enter that part using the applicable code.

AMT adjustment attributable to unrecaptured section 1250 gain or 28% rate gain (codes E and F). Enter the beneficiary’s distributive share of any AMT adjustments to the unrecaptured section 1250 gain (code E) or 28% rate gain (code F), whichever is applicable, in box 12.

Accelerated depreciation, depletion, and amortization (codes G through I). Enter any adjustments or tax preference items attributable to accelerated depreciation (code G), depletion (code H), or amortization (code I) that were directly apportioned to the beneficiary. For property placed in service before 1987, report separately the accelerated depreciation of real and leased personal property.

Exclusion items (code J). Enter the beneficiary’s share of the adjustment for minimum tax purposes from box 12, code A, of Schedule K-1 that is attributable to exclusion items (Schedule I (Form 1041), lines 2, 3, 4, 5, and 7).

Box 13—Credits and Credit Recapture

Enter each beneficiary’s share of the credits and credit recapture using the applicable codes. Listed below are the credits that can be allocated to the beneficiary(ies). Attach a statement if additional information must be provided to the beneficiary as explained below.

• Credit for estimated taxes (code A). Payment of estimated tax to be credited to the beneficiary (section 643(g)).

Caution: See the instructions for Schedule G, Part II, line 11, before you make an entry to allocate any estimated tax payments to a beneficiary. If the fiduciary doesn’t make a valid election, then the IRS will disallow the estimated tax payment that is reported on Schedule K-1 and claimed on the beneficiary’s return.

• Advanced manufacturing production credit (code D). Attach a statement showing the amount of the credit the beneficiary must report on Form 7207, Part II, line 7, with instructions to report the amount directly on Form 3800, Part III, line 1b, if the beneficiary’s only source for the credit is a pass-through entity.

• Clean electricity production credit (code E). Attach a statement showing the amount of the credit the beneficiary must report on Form 7211, Part II, line 10. If your only source for the credit is a pass-through entity, such as an estate or trust, you can report the amount directly on Form 3800, Part III, line 1gg.

• Other credits (code ZZ). This code is used to report the beneficiary’s share of all other credits.

• Work opportunity credit (code F).

• Credit for small employer health insurance premiums (code G).

• Biofuel producer credit (code H).

• Credit for increasing research activities (code I).

• Renewable electricity production credit (code J). Attach a statement that shows separately the amount of the credit the beneficiary must report on Form 8835, Part II, line 14, including the allocation of the credit for production during the 4-year period beginning on the date the facility was placed in service and for production after that period.

• Empowerment zone employment credit (code K).

• Clean fuel production credit (code L). Attach a statement showing the amount of the credit the beneficiary must report on Form 7218, Part II, line 2. If your only source for the credit is a pass-through entity, such as an estate or trust, you can report the amount directly on Form 3800, Part III, line 1q.

• Orphan drug credit (code M).

• Credit for employer-provided childcare facilities and services (code N).

• Biodiesel, renewable diesel, or sustainable aviation fuels credit (code O). If the credit includes the small agri-biodiesel credit, attach a statement that shows the beneficiary’s share of the small agri-biodiesel credit, the number of gallons claimed for the small agri-biodiesel credit, and the estate’s or trust’s productive capacity for agri-biodiesel.

• Credit to holders of tax credit bonds (code P).

• Credit for employer differential wage payments (code Q).

• Recapture of credits (code R). On an attached statement to Schedule K-1, provide any information the beneficiary will need to report recapture of credits.

• Credit for production from advanced nuclear power facilities (code S). Attach a statement showing the amount of the credit the beneficiary must report on Form 7213, Part I, Section 2, line 8. If your only source for the credit is a pass-through entity, such as an estate or trust, you can report the amount directly on Form 3800, Part III, line 1cc.

• Zero-emission nuclear power production credit (code T). Attach a statement showing the amount of the credit the beneficiary must report on Form 7213, Part II, Section 2, line 12. If your only source for the credit is a pass-through entity, such as an estate or trust, you can report the amount directly on Form 3800, Part III, line 1u.

• Credit for backup withholding (code B). Caution: Income tax withheld on wages can’t be distributed to the beneficiary.

• The low-income housing credit (code C). Attach a statement that shows the beneficiary’s share of the amount, if any, entered on line 6 of Form 8586, Low-Income Housing Credit, with instructions to report that amount on Form 8586, line 4, or Form 3800, Part III, line 4d, if the beneficiary’s only source for the credit is a pass-through entity.

Box 14—Other Information

Enter the dollar amounts and applicable codes for the items listed under “Other information.”

Foreign taxes (code B). Enter the beneficiary’s allocable share of taxes paid or accrued to a foreign country. Attach a statement reporting the beneficiary’s share of foreign tax (paid or accrued) and income by category including interest,

Instructions for Form 1041 (2025) 47

dividends, rents and royalties, and other income. See Form 1116 and Pub. 514 for more information.

Qualified rehabilitation expenditures (code C). Provide the beneficiary with a statement of their share of qualified rehabilitation expenditures and other information needed to complete Part VII of Form 3468, Investment Credit. If there are expenditures and other information from more than one activity, the attached statement will separately identify the expenditures and other information for each property. See the instructions for Form 3468, Part VII, for details.

Note: Expenditures related to rental real estate activities are subject to different passive activity limitation rules than other qualified rehabilitation expenditures. See the Instructions for Form 8582-CR for details.

Basis of energy property (code D). Provide the beneficiary with a statement with the distributive share of amounts needed to complete Form 3468, Part VI. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part VI, for details.

Foreign trading gross receipts (code G). Enter the beneficiary’s share, if any, of foreign trading gross receipts. See Form 8873 for more information.

NIIT (code H). Use code H to identify the amount of the beneficiary’s adjustment for section 1411 NII or deductions. See the Instructions for Form 8960. An attachment may be provided with the Schedule K-1 informing the beneficiary of the detailed items to be reported on Form 1040 or 1040-SR. See Net Investment Income Tax (NIIT), earlier, for more information on these amounts.

Section 199A information (code I). In the case of a trust or estate, the QBI deduction, also known as the section 199A deduction, is determined at the beneficiary level for the portions of QBI, qualified REIT dividends, and qualified PTP items apportioned to the beneficiaries. To allow beneficiaries to correctly figure their QBI deduction, the trust or estate must enter an asterisk (*) on each beneficiary’s Schedule K-1 next to code I and enter “STMT” in the right column to indicate that the information is provided on an attached statement. Do not add amounts into a single number and report it on Schedule K-1. The information must be separately identified for each trade or business the trust or estate directly conducts, including specified service trades or businesses (SSTBs). The trust or estate must attach the statement to each Schedule K-1, separately identifying the beneficiary’s allocable share of:

1. Qualified items of income, gain, deduction, and loss;
2. W-2 wages;
3. UBIA of qualified property;
4. Qualified PTP items; and
5. Section 199A dividends, also known as qualified REIT dividends.

The trust or estate must make an initial determination of which items are qualified items of income, gain, deduction, and loss at its level and report to each beneficiary their share of all items that may be qualified items at the beneficiary level. See Determining the trust’s or estate’s QBI or qualified PTP items, later. The beneficiary must then determine whether each item is includible in QBI.

In addition, the trust or estate must also report on whether any of its trades or businesses are SSTBs and identify on the statement any trades or businesses that are aggregated.

Trusts and estates should use Statement A—QBI Pass-Through Entity Reporting, in these instructions, or a substantially similar statement, to report each beneficiary’s allocable information from each trade or business, including QBI items, W-2 wages, UBIA of qualified property, qualified PTP items, and section 199A dividends by attaching the completed statement(s) to each beneficiary’s Schedule K-1. The trust or estate should also use Statement A to report each beneficiary’s share of QBI items, W-2 wages, UBIA of qualified property, qualified PTP items, and section 199A dividends reported to the trust or estate by another entity.

Note: The estate or trust must report each beneficiary’s share of qualified items of income, gain, deduction, and loss from a PTP. The PTP component is not limited by the W-2 wages and UBIA of qualified property limitations. Therefore, neither the PTP nor its owners (including estates and trusts) are required to report W-2 wages or UBIA of qualified property amounts related to a trade or business operated by a PTP.

Trusts and estates should use Statement B—QBI Pass-Through Entity Aggregation Election(s), in these instructions, or a substantially similar statement, to report aggregated trades or businesses and provide supporting information to beneficiaries on each Schedule K-1.

Trusts and estates should use Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural Cooperatives, in these instructions, or a substantially similar statement, to report allocable QBI and W-2 wages allocable to qualified payments from a specified agricultural or horticultural cooperative for each trade or business. This statement should also be used to report each beneficiary’s allocable section 199A(g) deduction reported to the trust or estate by the specified cooperative.

Determining the trust’s or estate’s qualified trades or businesses. The trust’s or estate’s qualified trades or businesses include its section 162 trades or businesses, except for SSTBs, or the trade or business of providing services as an employee. A section 162 trade or business generally includes any activity carried on to make a profit and with considerable, regular, and continuous activity. For more information on what qualifies as a trade or business for purposes of section 199A, see the instructions for Form 8995 or 8995-A.

• Rises to the level of a trade or business under section 162;

• Satisfies the requirements for the rental real estate safe harbor in Rev. Proc. 2019-38, 2019-42 I.R.B. 942; or

• Meets the self-rental exception (that is, the rental or licensing of property to a commonly controlled trade or business conducted by an individual or relevant pass-through entity (RPE)) in Regulations section 1.199A-1(b)(14).

The determination of whether rental real estate constitutes a trade or business for purposes of the QBI deduction is made by the trust or estate. The trust or estate must first make this determination and then only include the allocable share of rental real estate items of income, gain, loss, and deduction on the statement provided to beneficiaries. Rental real estate

Rental real estate. Rental real estate may constitute a trade or business for purposes of the QBI deduction if the rental real estate:

48 Instructions for Form 1041 (2025)

that does not meet one of the three conditions noted above does not constitute a trade or business for purposes of the QBI deduction and must not be included in the QBI information provided to beneficiaries.

SSTBs excluded from qualified trades or businesses. SSTBs are generally excluded from the definition of a qualified trade or business. An SSTB is any trade or business providing services in the field of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading or dealing in securities, trust or estate interests, or commodities or any other trade or business where the principal asset is the reputation or skill of one or more of its employees or owners. The term “any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners” means any trade or business that consists of any of the following: (a) a trade or business in which a person receives fees, compensation, or other income for endorsing products or services; (b) a trade or business in which a person licenses or receives fees, compensation, or other income for the use of an individual’s image, likeness, name, signature, voice, or trademark, or any other symbols associated with the individual’s identity; or (c) receiving fees, compensation, or other income for appearing at an event or on radio, television, or another media format.

Exception. If the beneficiary’s taxable income is equal to or less than the threshold for the reporting 2025 tax year, $197,300 ($394,600 if married filing jointly), the QBI from the SSTB may be used by the beneficiary to compute their QBI deduction. If the beneficiary’s taxable income is within the phase-in range, the threshold amount plus $50,000 ($100,000 if married filing jointly), an applicable percentage of the QBI, W-2 wages, and UBIA of qualified property from an SSTB may be used by the beneficiary to compute their QBI deduction. Therefore, the statement attached to the Schedule K-1 issued to each beneficiary must identify any items relating to SSTBs.

Aggregation. A trust or estate engaged in more than one trade or business may choose to aggregate multiple trades or businesses into a single trade or business for purposes of section 199A if it meets the following requirements.

1. The same person, or group of persons, either directly or through attribution, owns 50% or more of each trade or business for a majority of the tax year, including the last day of the tax year, and all trades or businesses use the same tax year-end.

2. None of the trades or businesses are SSTBs.

3. The trades or businesses to be aggregated meet at least two of the following three factors.

a. They provide products, property, or services that are the same or that are customarily offered together.

b. They share facilities or share significant centralized business elements, such as personnel, accounting, legal, manufacturing, purchasing, human resources, or information technology resources.

c. They are operated in coordination with, or reliance upon, one or more of the businesses in the aggregated group.

If the trust or estate chooses to aggregate multiple trades or businesses, it must report the aggregation on Statement B, or a substantially similar statement, and attach it to each Schedule K-1. The statement must provide the information necessary to identify each separate trade or business included in each aggregation, a description of the aggregated

trades or businesses, and an explanation of the factors met that allow the aggregation in accordance with Regulations section 1.199A-4. The aggregation statement must be completed each year to show the trust’s or estate’s trade or business aggregations. Failure to disclose the aggregations may cause them to be disaggregated.

The trust’s or estate’s aggregations must be reported consistently for all subsequent years, unless there is a change in facts and circumstances that changes or disqualifies the aggregation. The trust or estate must provide a written explanation for any changes to prior-year aggregations that describes the change in facts and circumstances.

If the trust or estate directly or indirectly owns an interest in an RPE that aggregates multiple trades or businesses, it must attach a copy of the RPE’s aggregation to each Schedule K-1. The trust or estate cannot break apart the aggregation of another RPE, but it may add trades or businesses to the aggregation, assuming the requirements above are satisfied.

Determining the trust’s or estate’s QBI or qualified PTP items. The trust’s or estate’s items of QBI that must be reported to beneficiaries include the allocated amounts of qualified items of income, gain, deduction, and loss from the trust’s or estate’s trades or businesses that are effectively connected with the conduct of a trade or business within the United States. This may include, but is not limited to, items such as ordinary business income or (losses), section 1231 gains or (losses), section 179 deductions, and interest from debt-financed distributions.

QBI may also include rental income (losses) or royalty income, if the activity rises to the level of a trade or business; and gambling gains or (losses), but only if the trust or estate is engaged in the trade or business of gambling. Whether an activity rises to the level of a trade or business must be determined at the entity level and, once made, is binding on beneficiaries.

Qualified PTP items that must be reported to the beneficiaries include the allocated amounts of the trust’s or estate’s share of qualified items of income, gain, deduction, and loss from a PTP and may also include gain or loss recognized on the disposition of the trust’s or estate’s partnership interest that is not treated as a capital gain or loss.

However, QBI and qualified PTP items don’t include any of the following.

• Items that are treated as capital gain or loss under any provision of the Code.

• Dividends or dividend equivalents, including qualified REIT dividends.

• Interest income (unless received in connection with the trade or business).

• Wage income.

• Income that is not effectively connected with the conduct of a trade or business within the United States (for more information, go to IRS.gov and type in the key word “effectively connected income”).

• Commodities transactions, or foreign currency gains or losses described in section 954(c)(1)(C) or (D).

• Income, loss, or deductions from notional principal contracts under section 954(c)(1)(F).

• Annuities (unless received in connection with the trade or business).

• Guaranteed payments described in section 707(c) received by the entity for services rendered to a partnership.

Instructions for Form 1041 (2025) 49

• Payments described in section 707(a) received by the entity for services rendered to a partnership.

QBI Flowchart. Trusts or estates may use the QBI Flowchart to help them determine if an allocated item of

income, gain, deduction, or loss is includible in QBI reportable to beneficiaries.

QBI Flowchart

Specific Instructions for Statement A—QBI Pass-Through Entity Reporting.

QBI or qualified PTP items. The trust or estate must first determine if it is engaged in one or more trades or businesses. It must then determine if any of its trades or businesses are SSTBs. The trust or estate must also determine whether it has qualified PTP items from an interest in a PTP. The trust or estate must indicate the status on the appropriate checkboxes for each trade or business (or aggregated trade or business) or PTP interest reported.

Note: SSTBs and PTPs cannot be aggregated with any other trade or business. So, if the aggregation box is checked, the “SSTB” and “PTP” boxes for that specific aggregated trade or business should not be checked.

Next, the trust or estate must report to each beneficiary their allocable share of all apportioned items that are QBI or qualified PTP items for each trade or business the trust or estate owns directly or indirectly. Use the QBI Flowchart to determine if an allocated item is reportable as a QBI item or qualified PTP item subject to beneficiary-specific determinations. Each item included under “Other” must be stated separately, identifying the nature and amount of each item.

W-2 wages and UBIA of qualified property. The trust or estate must determine the W-2 wages and UBIA of qualified property properly allocable to QBI for each qualified trade or business and report the allocable share to each beneficiary on Statement A, or a substantially similar statement, attached to Schedule K-1. This includes the allocable share of W-2 wages and UBIA of qualified property reported to the trust or estate from any qualified trades or businesses of an RPE the

trust or estate owns directly or indirectly. However, trusts or estates that own a direct or indirect interest in a PTP may not include any amounts for W-2 wages or UBIA of qualified property from the PTP, as the W-2 wages and UBIA of qualified property from a PTP are not allowed in computing the W-2 wage and UBIA limitations.

The W-2 wages are amounts paid to employees described in sections 6051(a)(3) and (8). If the trust or estate conducts more than one trade or business, it must allocate the W-2 wages among its trades or businesses. See Rev. Proc. 2019-11, 2019-09 I.R.B. 742, for more information. The unadjusted basis of qualified property is figured by adding the unadjusted basis of all qualified assets immediately after acquisition. Qualified property includes all tangible property subject to depreciation under section 167 for which the depreciable period hasn’t ended that is held and used for the production of QBI by the trade or business during the tax year and held on the last day of the tax year. The depreciable period ends on the later of 10 years after the property is placed in service or the last day of the full year for the applicable recovery period under section 168.

Section 199A dividends. The trust or estate must report the apportioned allocable share of any REIT dividends to each beneficiary on Statement A, or a substantially similar statement, attached to Schedule K-1. Section 199A dividends do not have to be reported by trade or business and can be reported as a single amount to beneficiaries. Section 199A dividends include dividends the trust or estate receives from a REIT held for more than 45 days, for which the payment is not obligated to someone else, is not a capital gain dividend under section 857(b)(3), and is not a qualified

50 Instructions for Form 1041 (2025)

dividend under section 1(h)(11), plus any apportioned qualified REIT dividends received from a RIC.

Fiscal-year trusts and estates. For purposes of determining the QBI or qualified PTP items, UBIA of qualified property, and the aggregate amount of qualified section 199A dividends, fiscal-year trusts or estates include all items from the fiscal tax year.

For purposes of determining W-2 wages, fiscal year trusts or estates include apportioned amounts paid to employees under sections 6051(a)(3) and (8) for the calendar year ended with or within the trust’s or estate’s tax year. If the trust

or estate conducts more than one trade or business, it must allocate W-2 wages among its trades or businesses. See Rev. Proc. 2019-11 for more information.

Note: The trust or estate must report each beneficiary’s share of qualified items of income, gain, deduction, and loss from a PTP, but the W-2 wages and UBIA of qualified property from the PTP should not be reported, as the beneficiary cannot use that information in computing their QBI deduction.

Statement A—QBI Pass-Through Entity Reporting

Specific Instructions for Statement B—QBI Pass-Through Entity Aggregation Election(s). If the trust or estate elects to aggregate more than one trade or business that meets all the requirements to aggregate, the trust or estate must report the aggregation to beneficiaries on Statement B, or a substantially similar statement, and attach it to each Schedule K-1. The trust or estate must indicate trades or businesses that were aggregated by checking the appropriate box for each aggregated trade or business. The trust or estate must also provide a description of the aggregated trade or business and an explanation of the factors met that allow the aggregation.

The aggregation statement must be completed each year to show the trust’s or estate’s trade or business aggregations. Failure to disclose the aggregations may cause them to be

disaggregated. The trust’s or estate’s aggregations must be reported consistently for all subsequent years, unless there is a change in facts and circumstances that changes or disqualifies the aggregation. The trust or estate must provide a written explanation for any changes to prior-year aggregations that describes the change in facts and circumstances.

If the trust or estate holds a direct or indirect interest in an RPE that aggregates multiple trades or businesses, the trust or estate must also include a copy of the RPE’s aggregations with each beneficiary’s Schedule K-1. The trust or estate cannot break apart the aggregation of another RPE, but it may add trades or businesses to the aggregation, assuming the aggregation requirements are satisfied.

Instructions for Form 1041 (2025) 51

Statement B—QBI Pass-Through Entity Aggregation Election(s)

Pass-through entity’s name: Pass-through entity’s EIN:

Aggregation of Pass-Through Business Operations Aggregation 1

Provide a description of the aggregated trades or businesses and an explanation of the factors met that allow the aggregation in accordance with Regulations section 1.199A-4. In addition, if the pass-through entity holds a direct or indirect interest in a relevant pass-through entity (RPE) that aggregates multiple trades or businesses, attach a copy of the RPE’s aggregations.

Has this trade or business aggregation changed from the prior year? This includes changes in the aggregation due to a trade or business being formed, acquired, disposed, or ceasing operations. If yes, explain.

Note: If you have more than one aggregated group, attach additional Statements B. Name the additional aggregations 2, 3, 4, and so forth.

Specific Instructions for Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural Cooperatives.

QBI items and wages allocable to qualified payments. If the trust or estate is a patron of a specified agricultural or horticultural cooperative, the trust or estate must provide the allocable share of QBI items and W-2 wages allocable to qualified payments from each trade or business to each of its beneficiaries on Statement C, or a substantially similar statement, and attach it to Schedule K-1 so each beneficiary can compute their patron reduction under section 199A(b)(7).

QBI items and W-2 wages allocable to qualified payments include apportioned QBI items included on Statement A that are allocable to the qualified payments reported to the trust or estate on Form 1099-PATR from the cooperative.

Section 199A(g) deduction. The trust or estate must report to its beneficiaries their allocable shares of any apportioned section 199A(g) deduction passed through the cooperative, as reported on Form 1099-PATR. Section 199A(g) deductions do not have to be reported by trade or business and can be reported as a single amount to beneficiaries.

Code J. Qualifying advanced coal project property and qualifying gasification project property. Provide the

beneficiary with a statement with the distributive share of amounts that the beneficiary will need to complete Form

52 Instructions for Form 1041 (2025)

3468, Part II, Sections A and B. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part II, Sections A and B, for details.

Code K. Qualifying advanced energy project property. Provide the beneficiary with a statement with the distributive share of amounts that the beneficiary will need to complete Form 3468, Part III. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part III, for details.

Code L. Advanced manufacturing investment property. Provide the beneficiary with a statement with the distributive share of amounts that the beneficiary will need to complete Form 3468, Part IV. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part IV, for details.

Code M. Clean electricity investment credit. Provide the beneficiary with a statement with the distributive share of amounts that you will need to complete Form 3468, Part V. If there is information for more than one property, the attached statement will separately identify the information for each property. See the instructions for Form 3468, Part V, for details.

Other information (code ZZ). List on a separate sheet the tax information the beneficiary will need to complete their return that isn’t entered elsewhere on Schedule K-1.

For example, if the estate or trust participates in a transaction that must be disclosed on Form 8886 (see earlier), both the estate or trust and its beneficiaries may be required to file Form 8886. The estate or trust must determine

if any of its beneficiaries are required to disclose the transaction and provide those beneficiaries with information they will need to file Form 8886. This determination is based on the category(ies) under which a transaction qualified for disclosure. See the Instructions for Form 8886 for details.

In addition, if the beneficiary is a “covered person” in connection with a foreign tax credit splitter arrangement under section 909, attach a statement that identifies the arrangement including the foreign taxes paid or accrued.

Inclusion of global intangible low-taxed income (GILTI). Section 951A requires U.S. shareholders of controlled foreign corporations to report their ratable share of GILTI in taxable income. If applicable, provide the information necessary to figure the GILTI inclusion to each beneficiary. See the Instructions for Form 8992 for details.

Foreign-derived intangible income (FDII). Public Law 115-97 enacted section 250, which allows a domestic corporation a deduction for the eligible percentage of FDII and GILTI. Section 250 is effective for tax years beginning after 2017. If applicable, provide the necessary information to each domestic corporate beneficiary for its calculation of FDII benefit. See section 250 for more information. See the Instructions for Form 8993 for details.

Limitation on business interest expense. If an estate or trust is required to file Form 8990, the adjusted taxable income of an estate or trust beneficiary is reduced by any income (including any DNI) received from the estate or trust by the beneficiary to the extent such income supported a deduction for business interest expense under section 163(j) (1)(B) in computing the estate’s or trust’s taxable income. If applicable, provide the beneficiary the necessary information to calculate this amount in an attachment to Schedule K-1. See Form 8990 and the Instructions for Form 8990 for additional information.

Instructions for Form 1041 (2025) 53

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. Our legal right to ask for this information is in Internal Revenue Code sections 6011 and 6012, and their associated regulations. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You aren’t required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by Code section 6103.

Estimate of Taxpayer Burden. The following table shows burden estimates based on current statutory requirements as of October 1, 2025, for taxpayers filing a 2025 Form 1041-series tax return. Time spent and out-of-pocket costs are presented separately. The estimates are broken down by the type of entity. Out-of-pocket costs include any expenses incurred by taxpayers to prepare and submit their tax returns. Examples include tax return preparation and submission fees, postage and photocopying costs, and tax return preparation software costs. While these estimates don’t include burden associated with post-filing activities, IRS operational data indicate that electronically prepared and filed returns have fewer arithmetic errors, implying lower post-filing burden.

Reported time and cost burdens are national averages and don’t necessarily reflect a “typical” case. Most taxpayers experience lower than average burden, with taxpayer burden varying considerably by taxpayer type.

The average burden for simple trusts filing Form 1041 and related attachments is about 8 hours and $1,300; the average burden for complex trusts filing Form 1041 and related attachments is about 10 hours and $2,000; and the average burden for decedent estates filing Form 1041 and all related attachments is 17 hours and $3,300. The average burdens for the other types of entities are listed in the table below. Within each of these estimates, there is significant variation in taxpayer activity. Tax preparation fees and other out-of-pocket costs vary extensively depending on the tax situation of the taxpayer, the type of software or professional preparer used, and the geographic location. Third-party burden hours are not included in these estimates.

Comments and suggestions. We welcome your comments concerning the accuracy of these time estimates or suggestions for making this form and related schedules simpler. You can send us comments through IRS.gov/FormComments . Or you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send Form 1041 to this address. Instead, see Where To File, earlier.

54 Instructions for Form 1041 (2025)

Index

A

Section 645 Election 21

Accounting income 3 Adjusted gross income (AGI) 4, 10, 16, 17,

Bankruptcy 7, 19 Exemption for 29 Foreign 5 Who must file 5 Estate tax deduction 29 Estimated tax 10, 30

Allocation of payments to beneficiaries 10 Penalty 30 Exemption 29 Extraterritorial income exclusion 21

F

Fiduciary 4, 5, 9 Fiduciary accounting income (FAI)

( See Accounting income) Final return 20 First-tier distributions 32 Foreign tax credit 34 Form 1041-T 10 Form 8855 5 Form 8886 13, 53

G

Q

Qualified business income deduction 29 Qualified disability trust 29 Qualified revocable trust 5 Qualified settlement funds 8 Qualified small business stock 32 Qualified subchapter S trust (QSST) 5, 14,

19

R

29, 38, 46 Alaska Native Settlement Trusts 7 Amended return 20 Amounts paid or permanently set

aside 31 Assembly 13 Attachments 13

B

Bankruptcy estate 7, 16, 19 Bankruptcy information 16 Beneficiary 4

Allocation of estimated tax payment 10 Complex trust 44 Estate 44 Simple trust 44 Tax year for inclusion 44 Withholding on foreign person 31 Blind trust 21

C

Cemetery perpetual care fund 28 Charitable deduction 30 Charitable remainder trusts 20 Common trust fund 7

D

plans 19 Optional filing methods 14 Pre-need funeral trusts 19 Special filing instructions 13 GST tax deduction 29

Returns :

Amended 20 Common trust fund 7 Electronic and magnetic media 8 Final 20 Nonexempt charitable trust 19, 20 Qualified settlement funds 8 Split-interest trust 20 When to file 8 Who must file 5 Revocable Living Trusts :

General business credit 34 Grantor trusts 3, 5, 13, 19

Backup withholding 15 Nonqualified deferred compensation

Decedent’s Estate 4 Definitions :

Accumulation distribution 40 Adjusted gross income (AGI) 4 Beneficiary 4 Complex trust 19 Decedent’s estate 18 Decedent’s Estate 4 DNI 4 Fiduciary 4 Grantor trusts 19 IRD 4 Outside income 41 Pooled income fund 19 Revocable Living Trust 5 Simple trust 18 Trust 5 Trusts 5 Distributable net income ( See DNI) DNI 4, 31

E

Electing small business trusts 15

S

Second-tier distributions 33 Separate share rule 31 Special filing instructions :

Bankruptcy estates 18 Electing small business trusts 15 Grantor trusts 13 Pooled income funds 15 Split-interest trust 20 Substitute forms 43

T

Tax rate schedule 33 Taxable income 29 Throwback years 41 Trusts 5

Alaska Native Settlement 7 Blind 21 Common trust fund 7 Complex 44 Domestic 5 Exemption for 29 Foreign 39 Grantor 3 Inter vivos 3, 5 Nonexempt charitable 19, 20, 30 Pre-need funeral 19 Qualified disability 29 Qualified revocable 5 Simple 44 Split-interest 20 Testamentary 3, 5 Who must file 5, 43

W

Where to file 9 Who must file :

Decedent’s estate 5 Trust 5 Withholding on foreign person 31

ESBT (S portion only) 19 S portion 15 Elections :

Section 643(e)(3) 32 Section 643(g) 10 Section 645 5 Special rule for qualified revocable trusts 5 Treating contributions as paid in prior tax

I

Income distribution deduction 3, 28, 31 Inter vivos 3, 5 Interest income 21 IRD :

Deduction 29

M

Minimum taxable income 29

N

Net investment income tax 38 Net operating loss 29 Nonexempt charitable deduction 20 Nonexempt charitable trust 19, 30 Nonqualified deferred compensation

plans 19

P

Paid preparer 9 Paid preparer authorization 9 Penalties :

Estimated tax 30 Failure to provide a required TIN 43 Failure to provide information timely 11 Late filing of return 11 Late payment of tax 11 Other 11 Trust fund recovery 11 Underpaid estimated tax 11 Pooled income funds 15, 19, 30, 31 Pre-need funeral trusts 19

year 30 Electronic deposits 10 ESBTs ( See Electing small business trusts) Estate 5, 44

55