Deductions — Instruction 1120-S (Schedule K-1)

Caution: There are potential limitations on corporate losses you can deduct on your return. 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. See Limitations on Losses, Deductions, and Credits , earlier.

Box 11. Section 179 Deduction Use this amount, along with the total cost of section 179 property placed in service during the year from other sources, to complete Part I of Form 4562, Depreciation and Amortization. The corporation will report on an attached statement your share of the cost of any qualified enterprise zone property or qualified real property it placed in service during its tax year. Report the amount from line 12 of Form 4562 allocable to a passive activity using the Instructions for Form 8582. If the amount isn’t a passive activity deduction, report it in column (j) of Schedule E (Form 1040), line 28, after applying the basis and at-risk limitations on losses. See Limitations on Losses, Deductions, and Credits, earlier.

Box 12. Other Deductions See List of Codes , later.

Caution: Deductions reported in box 12 may be limited. See Limitations on Losses, Deductions, and Credits , earlier.

Your share of the gain eligible for the section 1045 rollover can’t exceed the amount that would have been allocated to you based on your interest in the corporation at the time the QSB stock was acquired, and
You must purchase other QSB stock (as defined in the Instructions for Schedule D (Form 1040)) during the 60-day period that began on the date the QSB stock was sold by the corporation.

See Form 8949, Schedule D (Form 1040), and the related instructions for details on how to report the gain and the amount of the allowable postponed gain.

Code O. Sale or exchange of QSB stock with section 1202 exclusion. Gain from the sale or exchange of QSB stock eligible for the section 1202 exclusion. The corporation should also give you (a) the name of the corporation that issued the QSB stock, (b) your share of the corporation’s adjusted basis and sales price of the QSB stock, and (c) the dates the QSB stock was bought and sold. The following additional limitations apply at the shareholder level.

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Contributions. Codes A through G. The corporation will give you a statement that shows charitable contributions subject to the 100%, 60%, 50%, 30%, and 20% adjusted gross income (AGI) limitations. If the corporation made a property contribution, it will report on an attached statement your share of both the fair market value (FMV) and adjusted basis of the property. Use these amounts to adjust your stock basis. If the corporation made a qualified conservation contribution, it will report the FMV of the underlying property before and after the donation, the type of legal interest contributed, and a description of the conservation purpose furthered by the donation. If the corporation made a contribution of real property located in a registered historic district, it will report any information you will need to take a deduction.

corporations in the Instructions for Form 8283. You must fill out your own Form 8283 and attach the Form 8283 the S corporation provides you. See the Instructions for Form 8283 for more details. The S corporation will provide you your relevant basis. You must report this in column (h) of line 3 on your own Form 8283. The S corporation may need information from you to calculate relevant basis.

Form 8283. If you received a copy of Form 8283 from the corporation, attach the copy to your tax return. Use the amount shown on your Schedule K-1, not the amount shown on the Form 8283, to figure your deduction.

You must fill out your own Form 8283 with the information the corporation provides you and attach the Form 8283 the corporation provides you to your return. See the Instructions for Form 8283 for more details.

For more details, see Pub. 526, Charitable Contributions, and the Instructions for Schedule A (Form 1040). If your contributions are subject to more than one of the AGI limitations, see Pub. 526.

Charitable contribution deductions aren’t taken into account in figuring your passive activity loss for the year. Don’t enter them on Form 8582.

If the corporation claims a qualified conservation contribution, the corporation will provide you with your relevant basis. You must report this in column (h) of your own Form 8283, line 3. The corporation may need information from you to calculate relevant basis.

The corporation will report your share of qualified conservation contributions of property. Subject to three exceptions, each S corporation shareholder’s claim of a charitable contribution deduction for a conservation contribution is disallowed if the amount of the contribution exceeds 2.5 times the sum of each ultimate member’s relevant basis (disallowance rule). See the Instructions for Form 8283, Noncash Charitable Contributions, and Regulations sections 1.170A-14(j) through (n) for more details and information on the three exceptions.

Relevant basis is, with respect to any ultimate member, the portion of the ultimate member’s modified basis that is allocable to the portion of the real property with respect to which the qualified conservation contribution is made. The ultimate members of an S corporation are the shareholders that receive a pro rata allocation of a qualified conservation contribution that is either made by the S corporation (contributing S corporation) or made by a partnership (contributing partnership) that allocates an allocated portion of the qualified conservation contribution, directly or indirectly through one or more upper-tier partnerships, to an upper-tier S corporation.

If the amount of a contributing partnership’s contributing S corporation’s, or upper-tier partnership’s qualified conservation contribution equals or is less than 2.5 times the sum of each ultimate member’s relevant basis, then any upper-tier S corporation must still determine whether the disallowance rule applies to its allocated portion of the qualified conservation contribution. Subject to three exceptions, if an upper-tier S corporation’s allocated portion exceeds 2.5 times the sum of each ultimate member’s relevant basis, the contribution is not treated as a qualified conservation contribution with respect to the upper-tier S corporation, or any ultimate member. No one may claim a deduction for the allocated portion attributable to the upper-tier S corporation.

If the corporation is the entity where the noncash charitable contribution was originally reported, you input the entity name and identifying number on your own Form 8283. See the Instructions for Form 8283 for more details. If the corporation is not the entity where the noncash charitable contribution was originally reported, the corporation will provide you the entity name and identifying number where the noncash charitable contribution was originally reported. Input this information on your own Form 8283.

Code A. Cash contributions (60%). Report this amount, subject to the 60% AGI limitation, on Schedule A (Form 1040), line 11.

Code B. Cash contributions (30%). Report this amount, subject to the 30% AGI limitation, on Schedule A (Form 1040), line 11.

Code C. Noncash contributions (50%). Report this amount, subject to the 50% AGI limitation, on Schedule A (Form 1040), line 12.

Food inventory contributions. The corporation will report on an attached statement your share of qualified food inventory contributions. The food inventory contribution isn’t included in the amount reported in box 12 using code C. The corporation will also report your share of the corporation’s net income from the business activities that made the food inventory contribution(s). Your deduction for food inventory contributions made during 2025 can’t exceed 15% of your aggregate net income for the tax year from the business activities from which the food inventory contribution was made (including your share of net income from partnership or S corporation businesses that made food inventory contributions). Amounts that exceed the 15% limitation may be carried over for up to 5 years. Report this amount, subject to the 50% AGI limitation, on Schedule A (Form 1040), line 12.

Code D. Noncash contributions (30%). Report this amount, subject to the 30% AGI limitation, on Schedule A (Form 1040), line 12.

See Qualified Conservation Contribution in Pub. 526 and Disallowance of deduction for certain qualified conservation contributions by partnerships and S

10 Instructions for Schedule K-1 (Form 1120-S) (2025)

Code E. Capital gain property to a 50% limit organi- zation (30%). Report this amount, subject to the 30% AGI limitation, on Schedule A (Form 1040), line 12. See Worksheet 2 in Pub. 526.

Code F. Capital gain property (20%). Report this amount, subject to the 20% AGI limitation, on Schedule A (Form 1040), line 12.

Code G. Contributions (100%). The corporation will report on an attached statement your share of qualified conservation contributions of property used in agriculture or livestock production. This contribution isn’t included in the amount reported in box 12 using code C. If you are a farmer or rancher, you qualify for a 100% AGI limitation for this contribution. Otherwise, your deduction for this contribution is subject to a 50% AGI limitation. Report this amount, subject to your applicable limitation, on Schedule A (Form 1040), line 12. See Pub. 526 for more information on qualified conservation contributions.

Code H. Investment interest expense. Report this amount on Form 4952, line 1.

If the corporation has investment income or other investment expense, it will report your share of these items in box 17 of Schedule K-1 using codes A and B. Include investment income and expenses from other sources to figure how much of your total investment interest is deductible.

For more information on the special provisions that apply to investment interest expense, see Form 4952 and Pub. 550.

Code I. Deductions—royalty income. Report deductions allocable to royalties on Schedule E (Form 1040), line 19. For this type of expense, enter “From Schedule K-1 (Form 1120-S).”

These deductions aren’t taken into account in figuring your passive activity loss for the year. Don’t enter them on Form 8582.

Code I. Deductions—royalty income. Report deductions allocable to royalties on Schedule E (Form 1040), line 19. For this type of expense, enter “From Schedule K-1 (Form 1120-S).”

Code J. Section 59(e)(2) expenditures. The corporation will show on an attached statement the type and the amount of qualified expenditures for which you may make a section 59(e) election. The statement will also identify the property for which the expenditures were paid or incurred. If there is more than one type of expenditure, the amount of each type will also be listed.

If you deduct these expenditures in full in the current year, they are treated as adjustments or tax preference items for purposes of alternative minimum tax. However, you may elect to amortize these expenditures over the number of years in the applicable period rather than deduct the full amount in the current year. If you make this election, these items aren’t treated as adjustments or tax preference items.

Under the election, you can deduct circulation expenditures ratably over a 3-year period. Research and experimental expenditures and mining exploration and development costs can be amortized over a 10-year period. Intangible drilling and development costs can be amortized over a 60-month period. The amortization periods begin with the month in which such costs were paid or incurred.

Make the election on Form 4562. If you make the election, report the current-year amortization of section 59(e) expenditures from Part VI of Form 4562 on Schedule E (Form 1040), line 28. If you don’t make the election, report the section 59(e)(2) expenditures on Schedule E (Form 1040), line 28, and figure the resulting adjustment or tax preference item (see Form 6251, Alternative Minimum Tax—Individuals). Whether you deduct the expenditures or elect to amortize them, report the amount on a separate line in column (i) of line 28 if you materially participated in the activity. If you didn’t materially participate, follow the Instructions for Form 8582 to figure how much of the deduction can be reported in column (g).

Code K. Reserved for future use.

Code L. Deductions—portfolio income (other). Generally, you should report these amounts on Schedule A (Form 1040), line 16. See the instructions for Schedule A (Form 1040), line 16, for details.

These deductions aren’t taken into account in figuring your passive activity loss for the year. Don’t enter them on Form 8582.

Code M. Preproductive period expenses. You may be able to deduct these expenses currently or you may need to capitalize them under section 263A. See Pub. 225, Farmer’s Tax Guide, and Regulations section 1.263A-4 for details.

Code N. Reserved for future use.

Code O. Reforestation expense deduction. The corporation will provide a statement that describes the qualified timber property for these reforestation expenses. The expense deduction is limited to $10,000 ($5,000 if married filing separately) for each qualified timber property, including your share of the corporation’s expense and any reforestation expenses you separately paid or incurred during the tax year.

If you didn’t materially participate in the activity, use Form 8582 to figure the amount to report in column (g) of Schedule E (Form 1040), line 28. If you materially participated in the reforestation activity, report the deduction in column (i) of Schedule E (Form 1040), line 28.

Codes P through V. Reserved for future use.

Code W. Soil and water conservation. Soil and water conservation expenditures and endangered species recovery expenditures. See section 175 for limitations on the amount you are allowed to deduct.

Code X. Film, television, theatrical, and qualified sound recording production expenditures. The corporation will provide a statement that describes the film, television, live theatrical, or qualified sound recording production generating these expenses. See section 181(a)(2) for dollar limitations that may apply. If you didn’t materially participate in the activity, use Form 8582 to determine the amount that can be reported in column (g) of Schedule E (Form 1040), line 28. If you materially participated in the production activity, report the deduction in column (i) of Schedule E (Form 1040), line 28.

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Code Y. Expenditures for removal of barriers. Expenditures for the removal of architectural and transportation barriers to the elderly and disabled that the corporation elected to treat as a current expense. The deductions are limited by section 190(c) to $15,000 per year from all sources.

Code Z. Itemized deductions. Itemized deductions that Form 1040 or 1040-SR filers report on Schedule A (Form 1040).

Code AA. Contributions to a capital construction fund (CCF). The deduction for a CCF investment isn’t taken on Schedule E (Form 1040). Instead, you subtract the deduction from the amount that would normally be entered as taxable income on Form 1040 or 1040-SR, line 15. In the margin to the left of line 15, enter “CCF” and the amount of the deduction.

Code AB. Penalty on early withdrawal of savings. Report this amount on Schedule 1 (Form 1040), line 18.

Code AC. Interest expense allocated to debt-financed distributions. The manner in which you report such interest expense depends on your use of the distributed debt proceeds. If the proceeds were used in a trade or business activity, report the interest on Schedule E (Form 1040), line 28. In column (a), enter the name of the corporation and “interest expense.” If you materially participated in the trade or business activity, enter the interest expense in column (i). If you didn’t materially participate in the activity, follow the Instructions for Form 8582 to figure the interest expense you can report in column (g). Material participation is defined earlier under Passive Activity Limitations . If the proceeds were used in an investment activity, report the interest on Form 4952. If the proceeds are used for personal purposes, the interest is generally not deductible.

Codes AD through AJ. Reserved for future use.

Code ZZ. Other deductions. Amounts with code ZZ are other deductions not included in box 12 using codes A through AC. The corporation will give you a description and the amount of your share for each of these items.

Box 13. Credits See List of Codes, later.

If you have credits that are passive activity credits to you, you must complete Form 8582-CR in addition to the credit forms identified below. See Passive Activity Limitations , earlier, and the Instructions for Form 8582-CR for details.

Tip: In general, shareholders whose only sources for a credit listed in Form 3800, General Business Credit, Part III, are partnerships, S corporations, estates, trusts, and cooperatives, aren’t required to complete the applicable credit form or attach it to their return. Instead, they can report the credit amounts reported to them by these pass-through entities directly in Form 3800, Part III, and enter the EIN of the entity in column (c) of Part III. However, when applicable, all shareholders must complete and attach the following credit forms to their return.

Form 3468, Investment Credit (Form 3800, Part III, line 1a).
Form 8864, Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels Credit (Form 3800, Part III, line 1l).

See the Instructions for Form 3800 for more details.

Code A. Zero-emission nuclear power production credit. Report this amount in Part II of Form 7213, Nuclear Power Production Credit, or on Form 3800, Part III, line 1u (see Tip, earlier).

Code B. Credit for production from advanced nuclear power facilities. Report this amount in Part I of Form 7213, or on Form 3800, Part III, line 1cc (see Tip, earlier).

Codes C and D. Low-income housing credit. If section 42(j)(5) applies, the corporation will report your share of the low-income housing credit using code C. If section 42(j)(5) doesn’t apply, your share of the credit will be reported using code D. Any allowable low-income housing credit reported using code C or D is reported on Form 8586, Low-Income Housing Credit, line 4, or Form 3800, Part III, line 4d (see Tip , earlier).

Keep a separate record of the low-income housing credit from each separate source so that you can correctly figure any recapture of low-income housing credit that may result from the disposition of all or part of your stock in the corporation. For more information on recapture, see the Instructions for Form 8611, Recapture of Low-Income Housing Credit.

Code E. Qualified rehabilitation expenditures (rental real estate). The corporation 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. Your share of qualified rehabilitation expenditures from property not related to rental real estate activities will be reported in box 17 using code C. See the Instructions for Form 3468 for details. If the corporation is reporting expenditures from more than one activity, an attached statement will separately identify the expenditures from each activity.

Combine the expenditures (for Form 3468 reporting) from box 13, code E, and from box 17, code C. The expenditures related to rental real estate activities (box 13, code E) are reported on Schedule K-1 separately from other qualified rehabilitation expenditures (box 17, code C) because they are subject to different passive activity limitation rules. See the Instructions for Form 8582-CR for details.

Code F. Other rental real estate credits. The corporation will identify the type of credit and any other information you need to figure these credits from rental real estate activities (other than the low-income housing credit and qualified rehabilitation expenditures). These credits may be limited by the passive activity limitations. If the credits are from more than one activity, the corporation will identify the credits from each activity on an attached statement. See Passive Activity Limitations, earlier, and the Instructions for Form 8582-CR for details.

Code G. Other rental credits. The corporation will identify the type of credit and any other information you need to figure these rental credits. These credits may be

12 Instructions for Schedule K-1 (Form 1120-S) (2025)

limited by the passive activity limitations. If the credits are from more than one activity, the corporation will identify the credits from each activity on an attached statement. See Passive Activity Limitations, earlier, and the Instructions for Form 8582-CR for details.

Code H. Undistributed capital gains credit. Code H represents taxes paid on undistributed capital gains by a RIC or REIT. Report these taxes on Schedule 3 (Form 1040), Additional Credits and Payments, line 13a. Reduce the basis of your stock by this tax.

Code I. Biofuel producer credit. Report this amount on line 3 of Form 6478, Biofuel Producer Credit, or Form 3800, Part III, line 4c (see Tip, earlier).

Code J. Work opportunity credit. Report this amount on line 3 of Form 5884, Work Opportunity Credit, or Form 3800, Part III, line 4b (see Tip, earlier).

Code K. Disabled access credit. Report this amount on line 7 of Form 8826, Disabled Access Credit, or Form 3800, Part III, line 1e (see Tip , earlier).

Code L. Empowerment zone employment credit. Report this amount on line 3 of Form 8844, Empowerment Zone Employment Credit, or Form 3800, Part III, line 3 (see Tip, earlier).

Code M. Credit for increasing research activities. Report this amount on Section C, line 29, of Form 6765, Credit for Increasing Research Activities, or Form 3800, Part III, line 1c (see Tip , earlier), as follows.

The S corporation will provide information necessary to determine if it is an eligible small business under section 38(c)(5)(A). If you and the S corporation are eligible small businesses, report the credit on line 4i. For more information, see the Instructions for Form 3800.
All others, report the credit on line 1c.

Code N. Credit for employer social security and Med- icare taxes. Report this amount on line 5 of Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, or Form 3800, Part III, line 4f (see Tip , earlier).

Code O. Backup withholding. This is your share of the credit for backup withholding on dividends, interest income, and other types of income. Include this amount in the total you enter on Form 1040 or 1040-SR, line 25c, and attach a copy of your Schedule K-1 to your tax return. Instead of attaching a copy of your Schedule K-1 to your tax return, you can include a statement with your return that provides the corporation’s name, address, EIN, and backup withholding amount.

Code P. Unused investment credit from the qualifying advanced coal project credit or qualifying gasifica- tion project credit allocated from cooperatives. Report this amount on Form 3468, Part II, line 6.

Code Q. Unused investment credit from the qualify- ing advanced energy project credit allocated from cooperatives. Report this amount on Form 3468, Part III, line 2.

Code R. Unused investment credit from the ad- vanced manufacturing investment credit allocated

from cooperatives. Report this amount on Form 3468, Part IV, line 2.

Code S. Unused investment credit from clean elec- tricity credit allocated from cooperatives. Report this amount on Form 3468, Part V, line 10.

Code T. Unused investment credit from the energy credit allocated from cooperatives. Report this amount on Form 3468, Part VI, line 31.

Code U. Unused investment credit from the rehabili- tation credit allocated from cooperatives. Report this amount on Form 3468, Part VII, line 2.

Code V. Advanced manufacturing production credit. Report on Form 7207, Advanced Manufacturing Production Credit, or Form 3800, Part III, line 1b (see Tip, earlier).

Code W. Clean electricity production credit. Report on Form 7211, Clean Electricity Production Credit, or Form 3800, Part III, line 1gg (see Tip , earlier).

Code X. Clean fuel production credit. Report on Form 7218, Clean Fuel Production Credit, or Form 3800, Part III, line 1q (see Tip , earlier).

Code Y. Clean hydrogen production credit. Report this amount on Form 7210, Clean Hydrogen Production Credit, or Form 3800, Part III, line 1g (see Tip, earlier).

Code Z. Orphan drug credit. Report this amount on Form 8820, Orphan Drug Credit, or Form 3800, Part III, line 1h (see Tip , earlier).

Code AA. Enhanced oil recovery credit. Report this amount on Form 8830, Enhanced Oil Recovery Credit, or Form 3800, Part III, line 1t (see Tip, earlier).

Code AB. Renewable electricity production credit. The corporation will provide a statement showing 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. Report this amount on Form 8835, Renewable Electricity Production Credit, or Form 3800, Part III, line 1f (see Tip, earlier).

Code AC. Biodiesel, renewable diesel, or sustainable aviation fuels credit. If this credit includes the small agri-biodiesel producer credit or the sustainable aviation fuels credit, the corporation will provide additional information on an attached statement. If no statement is attached, report this amount on Form 8864, line 10. If a statement is attached, see the instructions for Form 8864, line 10.

Code AD. New markets credit. Report this amount on Form 8874, New Markets Credit, or Form 3800, Part III, line 1i (see Tip, earlier).

Code AE. Credit for small employer pension plan startup costs. Report this amount in Form 8881, Credit for Small Employer Pension Plan Startup Costs, Auto-Enrollment, and Military Spouse Retirement Plan, Part I, or on Form 3800, Part III, line 1j (see Tip , earlier).

Code AF. Credit for small employer auto-enrollment. Report this amount in Form 8881, Part II, or on Form 3800, Part III, line 1dd (see Tip , earlier).

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Code AG. Credit for military spouse participation. Report this amount in Form 8881, Part III, or on Form 3800, Part III, line 1ee (see Tip , earlier).

Code AH. Credit for employer-provided childcare fa- cilities and services. Report this amount on Form 8882 or Form 3800, Part III, line 1k (see Tip, earlier).

Code AI. Low sulfur diesel fuel production credit. Report this amount on Form 8896, Low Sulfur Diesel Fuel Production Credit, or Form 3800, Part III, line 1m (see Tip, earlier).

Code AJ. Qualified railroad track maintenance credit. Report this amount on Form 8900, Qualified Railroad Track Maintenance Credit, or Form 3800, Part III, line 4g (see Tip, earlier).

Code AK. Credit for oil and gas production from mar- ginal wells. Report this amount on Form 8904, Credit for Oil and Gas Production From Marginal Wells, or Form 3800, Part III, line 1bb (see Tip, earlier).

Code AL. Distilled spirits credit. Report this amount on Form 8906, Distilled Spirits Credit, or Form 3800, Part III, line 1n (see Tip , earlier).

Code AM. Energy efficient home credit. Report this amount on Form 8908, Energy Efficient Home Credit, or Form 3800, Part III, line 1p (see Tip, earlier).

Code AN. Reserved for future use.

Code AO. Alternative fuel vehicle refueling property credit. Report this amount on Form 8911, Alternative Fuel Vehicle Refueling Property Credit, Part I, or Form 3800, Part III, line 1s (see Tip , earlier).

Code AP. Clean renewable energy bond credit. Report this amount on Form 8912, Credit to Holders of Tax Credit Bonds.

Code AQ. New clean renewable energy bond credit. Report this amount on Form 8912.

Code AR. Qualified energy conservation bond credit. Report this amount on Form 8912.

Code AS. Qualified zone academy bond credit. Report this amount on Form 8912.

Code AT. Qualified school construction bond credit. Report this amount on Form 8912.

Code AU. Build America bond credit. Report this amount on Form 8912.

Code AV. Credit for employer differential wage pay- ments. Report this amount on Form 8932, Credit for Employer Differential Wage Payments, or Form 3800, Part III, line 1w (see Tip, earlier).

Code AW. Carbon oxide sequestration credit. Report this amount on Form 8933, Carbon Oxide Sequestration Credit, or Form 3800, Part III, line 1x (see Tip, earlier).

Code AX. Carbon oxide sequestration credit recap- ture. The corporation will provide any information you need to figure your recapture tax. Report the carbon oxide sequestration credit recapture amount on Form 8933, Part III, line 8.

Code AY. New clean vehicle credit. Report this amount on Form 8936, Clean Vehicle Credits, Part II, or Form 3800, Part III, line 1y (see Tip , earlier).

Code AZ. Qualified commercial clean vehicle credit. Report this amount on Form 8936, Part V, or Form 3800, Part III, line 1aa (see Tip , earlier).

Code BA. Credit for small employer health insurance premiums. Report this amount on Form 8941, Credit for Small Employer Health Insurance Premiums, or Form 3800, Part III, line 4h (see Tip, earlier).

Code BB. Employer credit for paid family and medi- cal leave. Report on Form 8994, Employer Credit for Paid Family and Medical Leave, or Form 3800, Part III, line 4j (see Tip, earlier).

Code BC. Eligible credits from transferor(s) under section 6418. On a statement attached to Schedule K-1, the corporation will identify the type of transferred credits and any other information you need to file your tax returns. Report this amount on Form 3800. See the instructions for Form 3800, Parts III and V, for additional information.

Codes BD through BG. Reserved for future use.

Code ZZ. Other credits. On a statement attached to Schedule K-1, the corporation will identify the type of credit and any other information you need to figure credits other than those reported with codes A through BC. Most credits identified by code ZZ will be reported in Form 3800, Part III (see Tip , earlier). Section 6418 transfer election and retained section 48 credit. If the S corporation 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 that was not transferred by the S corporation, report this amount on Form 3800, Part III, line 4a.

Section 6418 transfer election and retained section 48C credit. If the S corporation has made an election under section 6418 with regard to a section 48C credit and is using code ZZ to report your share of the credit that was not transferred by the S corporation, report this amount on Form 3800, Part III, line 1d.

Section 6418 transfer election and retained section 48E credit. If the S corporation has made an election under section 6418 with regard to a section 48E credit and is using code ZZ to report your share of the credit that was not transferred by the S corporation, report this amount on Form 3800, Part III, line 1v.

Box 14. International Transactions If the S corporation checked the box, see the attached Schedule K-3 with respect to items of international tax relevance. If the S corporation did not check the box, the S corporation attached a statement to the Schedule K-1 (or issued a statement prior to furnishing the Schedule K-1) notifying the shareholder that the shareholder will not receive Schedule K-3 from the S corporation unless the shareholder requests the schedule.

For additional information, see the Shareholder’s Instructions for Schedule K-3 (Form 1120-S).

Box 15. Alternative Minimum Tax (AMT) Items See List of Codes , later.

14 Instructions for Schedule K-1 (Form 1120-S) (2025)

Use the information reported in box 15 (as well as your adjustments and tax preference items from other sources) to prepare your Form 6251, Alternative Minimum Tax—Individuals; or Schedule I (Form 1041), Alternative Minimum Tax—Estates and Trusts.

Code A. Post-1986 depreciation adjustment. This amount is your share of the corporation’s post-1986 depreciation adjustment. If you are an individual shareholder, report this amount on Form 6251, line 2l.

Code B. Adjusted gain or loss. This amount is your share of the corporation’s adjusted gain or loss. If you are an individual shareholder, report this amount on Form 6251, line 2k.

Code C. Depletion (other than oil & gas). This amount is your share of the corporation’s depletion adjustment. If you are an individual shareholder, report this amount on Form 6251, line 2d.

Codes D and E. Oil, gas, & geothermal proper- ties—gross income and deductions. The amounts reported on these lines include only the gross income (code D) from, and deductions (code E) allocable to, oil, gas, and geothermal properties included in box 1 of Schedule K-1. The corporation should have attached a statement that shows any income from, or deductions allocable to, such properties that are included in boxes 2 through 12, 16, and 17 of Schedule K-1. Use the amounts reported here and any other reported amounts to help you figure the net amount to enter on Form 6251, line 2t.

Code F. Other AMT items. Report the information on the statement attached by the corporation on the applicable lines of Form 6251 or Schedule I (Form 1041).

Box 16. Items Affecting Shareholder Basis See List of Codes , later.

Code A. Tax-exempt interest income. Report on your return, as an item of information, your share of the tax-exempt interest received or accrued by the corporation during the year. Individual shareholders include this amount on Form 1040 or 1040-SR, line 2a. Generally, you must increase the basis of your stock by this amount.

Code B. Other tax-exempt income. Generally, you must increase the basis of your stock by the amount shown, but don’t include it in income on your tax return.

Code C. Nondeductible expenses. The nondeductible expenses paid or incurred by the corporation aren’t deductible on your tax return. Generally, you must decrease the basis of your stock by this amount.

Code D. Distributions. Reduce the basis of your stock (as explained earlier) by distributions, not reported on Form 1099-DIV, of property or money. This amount will include any amounts included in income with respect to new clean renewable energy, qualified energy conservation, qualified school construction, build America, or (for bonds issued after October 3, 2008) qualified zone academy bonds. If these distributions exceed the basis of your stock, the excess is treated as capital gain from the sale or exchange of property and is reported on Form 8949 and Schedule D (Form 1040).

Code E. Repayment of loans from shareholders. If these payments are made on a loan with a reduced basis, the repayments must be allocated in part to a return of your basis in the loan and in part to the receipt of income. See Regulations section 1.1367-2 for information on reduction in basis of a loan and restoration in basis of a loan with a reduced basis. See Rev. Rul. 64-162, 1964-1 (Part 1) C.B. 304; and Rev. Rul. 68-537, 1968-2 C.B. 372, for details.

Code F. Foreign taxes paid or accrued. Report this amount in column (a) of Form 7203, Part III, line 46 . Do not use this amount to complete your Form 1116. See Schedule K-3 to complete your Form 1116.

Box 17. Other Information See List of Codes , later.

Code A. Investment income. Report this amount on Form 4952, line 4a.

Code B. Investment expenses. Report this amount on Form 4952, line 5.

Code C. Qualified rehabilitation expenditures (other than rental real estate). The corporation will report your share of qualified rehabilitation expenditures and other information you need to complete Form 3468 for property not related to rental real estate activities in box 17 using code C. Your share of qualified rehabilitation expenditures related to rental real estate activities is reported in box 13 using code E. See the Instructions for Form 3468 for details. If the corporation is reporting expenditures from more than one activity, the attached statement will separately identify the expenditures from each activity.

Code D. Basis of energy property. If the corporation provides an attached statement for code D, use the information on the statement to complete the applicable energy credit in Part VI of Form 3468. See the Instructions for Form 3468 for details.

Codes E and F. Recapture of low-income housing credit. The corporation will identify by code E your share of any recapture of a low-income housing credit from its investment in partnerships to which the provisions of section 42(j)(5) apply. All other recapture of low-income housing credits will be identified by code F.

Keep a separate record of each type of recapture so that you will be able to correctly figure any credit recapture that may result from the disposition of all or part of your corporate stock. For details, see Form 8611.

Code G. Recapture of investment credit. The corporation will provide any information you need to figure your recapture tax on Form 4255, Certain Credit Recapture, Excessive Payments, and Penalties. See the

Instructions for Schedule K-1 (Form 1120-S) (2025) 15

Form 3468 on which you took the original credit for other information you need to complete Form 4255.

You may also need Form 4255 if your proportionate stock interest in the corporation is reduced by more than one-third after you were allocated part of an investment credit.

from the amount of section 179 expense you deducted for the property if your interest in the corporation has changed.

If the disposition is due to a casualty or theft, any information you need to complete Form 4684.

Code H. Recapture of other credits. On a statement attached to Schedule K-1, the corporation will report any information you need to figure the recapture of other credits including the new markets credit (Form 8874), Indian employment credit (Form 8845), credit for employer-provided childcare facilities and services (Form 8882), alternative fuel vehicle refueling property credit (Form 8911), and qualified plug-in electric drive motor vehicle credit (Form 8936).

Code I. Look-back interest—completed long-term contracts. The corporation will report any information you need to figure the interest due or to be refunded under the look-back method of section 460(b)(2) on certain long-term contracts. Use Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts, to report any such interest.

Code J. Look-back interest—income forecast meth- od. The corporation will report any information you need to figure the interest due or to be refunded under the look-back method of section 167(g)(2) for certain property placed in service after September 13, 1995, and depreciated under the income forecast method. Use Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method, to report any such interest.

Code K. Dispositions of property with section 179 deductions. The corporation will report your share of gain or loss on the sale, exchange, or other disposition of property for which a section 179 expense deduction was passed through to shareholders with code K. If the corporation passed through a section 179 expense deduction for the property, you must report the gain or loss, if any, and any recapture of the section 179 expense deduction for the property on your income tax return (see the Instructions for Form 4797 for details). The corporation will provide all the following information.

If the sale was an installment sale, any information you need to complete Form 6252, Installment Sale Income. The corporation will separately report your share of all payments received for the property in the following tax years. See the Instructions for Form 6252 for details.
Your share of the section 179 expense deduction (if any) passed through for the property and the corporation’s tax year(s) in which the amount was passed through. Reduce this amount by the portion, if any, of your unused (carryover) section 179 expense deduction for this property.

Code M. Section 453(l)(3) information. The corporation will report any information you need to figure the interest due under section 453(l)(3) with respect to the disposition of certain timeshares and residential lots on the installment method. Report the interest on Schedule 2 (Form 1040), line 14. See section 453(l)(3) for details on how to figure the interest.

Code N. Section 453A(c) information. The corporation will report any information you need to figure the interest charge under section 453A(c) with respect to certain installment sales. See Pub. 537, Installment Sales. This information must include the following from each Form 6252 where the shareholder’s share of the selling price, including mortgages and other debts, is greater than $150,000.

Description of property.
Date acquired.
Date property sold.
Selling price, including mortgages and other debts (not including interest, whether stated or unstated).

Code L. Recapture of section 179 deduction. The corporation will report your share of any recapture of section 179 expense deduction if business use of any property for which the section 179 expense deduction was passed through to shareholders dropped to 50% or less before the end of the recapture period. If this occurs, the corporation must provide the following information.

Your share of the depreciation allowed or allowable (not including the section 179 expense deduction).
Description of the property.
Date the property was acquired and placed in service.
Date of the sale or other disposition of the property.
Your share of the gross sales price or amount realized.

Mortgages, debts, and other liabilities the buyer assumed or took the property subject to.

Your share of the cost or other basis plus the expense of sale.
Your share of the depreciation allowed or allowable.
Your share of the section 179 expense deduction (if any) passed through for the property and the corporation’s tax year(s) in which the amount was passed through.

To figure the depreciation allowed or allowable for Form 4797, line 22, add to the amount from item 6 above the amount of your share of the section 179 expense deduction, reduced by any unused carryover of the deduction for this property. This amount may be different

Gross profit.
Contract price.
Gross profit percentage.
Current-year payments and deemed payments received during the year, not including interest whether stated or unstated.
Installment sale income.
Character of the income—capital or ordinary.
Origination-year payments and deemed payments received during the year, not including interest whether stated or unstated.
Payments received in prior years, not including interest whether stated or unstated.

16 Instructions for Schedule K-1 (Form 1120-S) (2025)

See section 453A(c) for information on how to compute the interest charge on the deferred tax liability. The section 453A interest charge is reported on the “Other taxes” line of your tax returns. See Interest on Deferred Tax in Pub. 537 for additional details on how to compute the section 453A(c) interest.

Code O. Section 1260(b) information. The corporation will report any information you need to figure the interest due under section 1260(b). If the corporation had gain from certain constructive ownership transactions, your tax liability must be increased by the interest charge on any deferral of gain recognition under section 1260(b). Report the interest on Schedule 2 (Form 1040), line 17z. Enter “1260(b)” and the amount of the interest in the space to the left of line 17z. See section 1260(b) for details on how to figure the interest.

Code P. Interest allocable to production expendi- tures. The corporation will report any information you need relating to interest you are required to capitalize under section 263A for production expenditures. See Regulations sections 1.263A-8 through 1.263A-15 for details.

Code Q. Capital construction fund (CCF) nonquali- fied withdrawals. The corporation will report your share of nonqualified withdrawals from a CCF. These withdrawals are taxed separately from your other gross income at the highest marginal ordinary income or capital gains tax rate. Attach a statement to your federal income tax return to show your computation of both the tax and interest for a nonqualified withdrawal. Include the tax and interest on Schedule 2 (Form 1040), line 17z. In the space to the left of line 17z, enter the amount of tax and interest and “CCF.” See Pub. 595 for details.

Code R. Depletion information—oil and gas. This is your share of gross income from the property, share of production for the tax year, and other information needed to figure your depletion deduction for oil and gas wells. The corporation should also allocate to you a proportionate share of the adjusted basis of each corporate oil or gas property.

Reduce the basis of your stock by the amount of this deduction up to the extent of your adjusted basis in the property.

Codes S and T. Reserved for future use.

Code U. Net investment income. The corporation may use code U to report information you may need to determine your net investment income tax under section 1411, including information regarding income from controlled foreign corporations (CFCs) and passive foreign investment companies (PFICs), the stock of which is owned by the corporation. Any information not provided elsewhere on Schedule K-3 (or an attachment to Schedule K-3) is provided using code U. For CFCs and PFICs that you treat as qualified electing funds (QEFs), the information that is relevant to you will depend on whether you, the corporation, or a subsidiary pass-through entity has made an election under Regulations section 1.1411-10(g) with respect to the CFC or QEF. For example, if the corporation made an election under Regulations section 1.1411-10(g) for a CFC, the

stock of which is owned by the corporation, and the relevant income and deduction items derived from that CFC are reported elsewhere on Schedule K-1, you will not need the information provided using code U to complete your Form 8960.

Follow the Instructions for Form 8960 to figure and report your net investment income and AGI or MAGI. See Regulations sections 1.1411-1 through 1.1411-10 for more details.

Code V. Section 199A information. Generally, you may be allowed a deduction of up to 20% of your net qualified business income (QBI) plus 20% of your qualified REIT dividends, also known as section 199A dividends, and qualified publicly traded partnership (PTP) income from your S corporation. The S corporation will provide the information you need to figure your deduction. You will use one of these two forms to figure your QBI deduction.

Use Form 8995, Qualified Business Income Deduction Simplified Computation, if:

a. You have QBI, section 199A dividends, or PTP income (defined below);

b. Your 2025 taxable income before the QBI deduction is equal to or less than $197,300 ($394,600 if married filing jointly); and

c. You aren’t a patron in a specified agricultural or horticultural cooperative.

Use Form 8995-A, Qualified Business Income Deduction, if you don’t meet all three of these requirements.

QBI pass-through entity reporting information. Use the information provided to you by your S corporation to complete the appropriate form identified above.

QBI or qualified PTP items subject to shareholder-specific determinations. The amounts reported to you reflect your pro rata share of items from the S corporation’s trade(s) or business(es), or aggregation(s), and may include items that aren’t includible in your calculation of the QBI deduction. When determining QBI or qualified PTP income, you must include only those items that are qualified items of income, gain, deduction, and loss included or allowed in determining taxable income for the tax year. To determine your QBI or your qualified PTP income amounts and for information on where to report them, see the instructions for Form 8995 or 8995-A.

W-2 wages. The amounts reported reflect your pro rata share of the S corporation’s W-2 wages allocable to the QBI of each qualified trade or business, or aggregation. See the instructions for Form 8995 or 8995-A.

Unadjusted basis immediately after acquisition (UBIA) of qualified property. The amounts reported reflect your pro rata share of the S corporation’s UBIA of qualified property of each qualified trade or business, or aggregation. See the instructions for Form 8995 or 8995-A. Section 199A dividends. The amount reported reflects your pro rata share of the S corporation’s net section 199A dividends. See the instructions for Form 8995 or 8995-A.

Instructions for Schedule K-1 (Form 1120-S) (2025) 17

Patrons of specified agricultural and horticultural cooperatives. If the S corporation was a patron of an agricultural or horticultural cooperative (specified cooperative), you must use Form 8995-A to figure your QBI deduction. In addition, you must complete Schedule D (Form 8995-A), Special Rules for Patrons of Agricultural or Horticultural Cooperatives, to determine your patron reduction.

QBI items allocable to qualified payments from specified cooperatives subject to shareholder-specific determinations. The amounts reported to you reflect your pro rata share of items from the S corporation’s trade(s) or business(es), or aggregation(s), and include items that may not be includible in your calculation of the QBI deduction and patron reduction. When determining QBI items allocable to qualified payments, you must include only qualified items that are included or allowed in determining taxable income for the tax year. To determine your QBI items allocable to qualified payments, see the Instructions for Form 8995-A.

W-2 wages allocable to qualified payments from specified cooperatives. The amounts reported reflect your pro rata share of the S corporation’s W-2 wages allocable to qualified payments of each qualified trade or business, or aggregation. See the Instructions for Form 8995-A. Section 199A(g) deduction from specified cooperatives. The amount reported reflects your pro rata share of the S corporation’s net section 199A(g) deduction. See the Instructions for Form 8995-A.

Codes W through Z. Reserved for future use.

Code AA. Excess taxable income. If the S corporation is required to file Form 8990, Limitation on Business Interest Expense Under Section 163(j), it may determine it has excess taxable income. Report this amount of excess taxable income in column (c) of Form 8990, Schedule B, line 45, if you are required to file Form 8990. See the Instructions for Form 8990 for details.

Code AB. Excess business interest income. If the S corporation is required to file Form 8990, it may determine it has excess business interest income. Report this amount of excess business interest income in column (d) of Form 8990, Schedule B, line 45, if you are required to file Form 8990. See the Instructions for Form 8990 for details.

Code AC. Gross receipts for section 448(c). Use the gross receipts amount to figure the business interest expense you can deduct, if applicable. See section 163(j) and the Instructions for Form 8990 for details.

Codes AD through AI. Reserved for future use.

Code AJ. Excess business loss limitation. If the corporation has deductions attributable to a business activity, it’ll provide a statement gain, showing the aggregate gross income or gain and the aggregate deductions from the business activity of all the corporation’s trades or businesses. You can use this, along with other information, to figure any excess business loss limitation. See section 461(l) and the Instructions for Form 461 for details.

Codes AK through AM. Reserved for future use.

Code AN. Farming and fishing income. If you are an individual shareholder, report this income, as an item of information, on Schedule E (Form 1040), Part V, line 42. Don’t report this income elsewhere on Form 1040 or 1040-SR. For a shareholder that is an estate or a trust, report this income to the beneficiaries, as an item of information, on Schedule K-1 (Form 1041), Beneficiary’s Share of Income, Deductions, Credits, etc. Don’t report it elsewhere on Form 1041.

Code AO. Reserved for future use.

Code AP. Inversion gain. The corporation will provide a statement showing the amounts of each type of income or gain that is included in inversion gain. The corporation has included inversion gain in income elsewhere on Schedule K-1. Inversion gain is also reported under code AP because your taxable income and alternative minimum taxable income can’t be less than the inversion gain. Also, your inversion gain (a) isn’t taken into account in figuring the net operating loss (NOL) for the tax year or the NOL that can be carried over to each tax year, (b) may limit your credits, and (c) is treated as income from sources within the United States for the foreign tax credit. See section 7874 for details.

Codes AQ and AR. Reserved for future use.

Code AS. Qualifying advanced coal project property and qualifying gasification project property.

For qualified investment in qualifying advanced coal project property, use the amounts the corporation provides you to figure the amounts to report on Form 3468, Part II, Section A, lines 1a, 2a, and 3a.
For qualified investment in qualifying gasification project property, use the amounts the corporation provides you to figure the amounts to report on Form 3468, Part II, Section B, lines 4a and 5a.

Code AT. Qualifying advanced energy project proper- ty. Use the amounts the corporation provides you to figure the amounts to report on Form 3468, Part III, line 1a.

Code AU. Advanced manufacturing investment prop- erty. Use the amounts the corporation provides you to figure the amount to report on Form 3468, Part IV, line 1b.

Code AV. Clean electricity investment. Use the amounts the corporation provides you to figure the amount to report on Form 3468, Part V, line 1a.

Code AW. Reportable transactions. Any information you need to complete a disclosure statement for reportable transactions in which the corporation participates. If the corporation participates in a transaction that must be disclosed on Form 8886, Reportable Transaction Disclosure Statement, both you and the corporation may be required to file Form 8886 for the transaction. The determination of whether you are required to disclose a transaction of the corporation is based on the category(ies) under which the transaction qualifies for disclosure and is determined by you and the corporation. You may have to pay a penalty if you are required to file Form 8886 and don’t do so. See the Instructions for Form 8886 for details.

18 Instructions for Schedule K-1 (Form 1120-S) (2025)

Codes AX through AZ. Reserved for future use.

Code BA. Domestic research or experimental expen- ditures. P.L. 119-21 added section 174A, which pertains to domestic research and experimental expenditures. Section 174A(a) allows a deduction for domestic research and experimental expenditures paid or incurred during the tax year for tax years beginning after 2024.

Section 174A(c) allows an election to charge research and experimental expenditures to a capital account. Under section 174A(c), you may elect to charge such expenditures to a capital account rather than deducting them and be allowed an amortization deduction of such expenditures proportionately over a period of not less than 60 months. P.L. 119-21, section 70302(f)(1), allows an election by small business taxpayers to retroactively claim a deduction for amounts expended or incurred after 2021 and before 2025. P.L. 119-21, section 70302(f)(2), allows an election to deduct certain unamortized amounts paid or incurred in tax years beginning after 2021 and before 2025. For more information about section 174A, and the provisions contained in P.L. 119-21, sections 70302(f)(1) and (2), see Rev. Proc. 2025-28.

Codes BB through BD. Reserved for future use.

Code ZZ. Other. Any other information you may need to file your return not shown elsewhere on Schedule K-1.

Interest on loans secured by rural or agricultural real property. P.L.119-21 enacted new section 139L that

allows a qualified lender to exclude 25% of the interest income on qualified loans secured by rural or agricultural real property. Use code ZZ to provide shareholders their distributable shares. For more information see Notice 2025-71 .

Sale of qualified farmland property. The S corporation will provide the information you need to make an election under section 1062 to pay tax on the gain from the sale or exchange of qualified farmland property to qualified farmers in installments. See section 1062 and the Instructions for Form 1062 for additional information.

Box 18. More Than One Activity for At-Risk Purposes When the corporation has more than one activity for at-risk purposes, it will check this box and attach a statement. Use the information in the attached statement to correctly determine your at-risk limitations. For more information, see At-Risk Limitations, earlier.

Box 19. More Than One Activity for Passive Activity Purposes When the corporation has more than one activity for passive activity purposes, it will check this box and attach a statement. Use the information in the attached statement to correctly determine your passive activity limitations. For more information, see Passive Activity Limitations , earlier.

Instructions for Schedule K-1 (Form 1120-S) (2025) 19