U.S. · Tax forms
K-1 (1065) box 1 ordinary business income.
Where your share of a partnership’s trade or business income or loss lands on Schedule E.
Box 1 of Schedule K-1 (Form 1065) is your share of the partnership’s ordinary income (loss) from trade or business activities. An individual reports it on Schedule E (Form 1040), line 28. If you materially participated, it goes in column (i) or (k). If you did not, income goes in column (h) and a loss goes through Form 8582 first, then column (g). Basis and at-risk limits apply before any of that.
Find where box 1 goes
Result
Box 1 by situation (2025 K-1)
| Situation | Meaning | Where it goes (per the IRS instructions) |
|---|---|---|
| MP | You materially participated (income or loss) | Schedule E (Form 1040), line 28, column (i) or (k), after applying the basis and at-risk limitations on losses |
| INC | You did not materially participate and box 1 is income | Schedule E (Form 1040), line 28, column (h) |
| LOSS | You did not materially participate and box 1 is a loss | Follow the Instructions for Form 8582 to find how much of the loss is allowed, then report that amount in column (g) of Schedule E, line 28 |
| PTP | The box in item D (publicly traded partnership) is checked | Use the PTP rules in the K-1 instructions instead of the columns above. Passive income, gains and losses from a PTP are not reported on Form 8582 |
| MULTI | The partnership had more than one trade or business | The partnership attaches a statement identifying the income or loss from each activity |
What box 1 contains
Box 1 is the ordinary part of the partnership’s business result. Rental real estate income goes in box 2, other rental income in box 3, and guaranteed payments to partners in boxes 4a through 4c, so those amounts are not mixed into box 1. Portfolio items such as interest, dividends and royalties have their own boxes (5 to 7) as well. The IRS instructions add that you may owe tax on your share of partnership income whether or not it was distributed to you.
Four limits, in a fixed order
The instructions list the limits on partnership losses in the order you apply them: basis, at-risk, passive activity, then excess business loss. Your deductible loss can be less than the number printed in box 1. Generally you can claim a partnership loss only up to your adjusted basis in the partnership at the end of its tax year, and what is not allowed carries forward. The capital account in item L is the partnership’s bookkeeping figure and cannot be used as your tax basis.
Worked example
Dana materially participates in a partnership and has $42,000 in box 1. She reports it on Schedule E, line 28, in column (i) or (k) as the instructions direct. Raj is a passive investor with a $9,000 loss in box 1. He first checks that the loss fits within his basis and at-risk amount, then uses the Form 8582 instructions to find how much is allowed. Only that allowed amount goes in column (g). The rest is handled under the passive activity rules.
More K-1 (Form 1065) pages
Other pages in this set: K-1 (1065) Box 17, K-1 (1065) Box 18, K-1 (1065) Box 20 Codes A and B, K-1 (1065) Box 20 Code N, K-1 (1065) Box 20 Code V, K-1 (1065) Box 20 Code W, K-1 (1065) Box 20 Code AH, K-1 (1065) Box 20 Code Y, K-1 (1065) Box 20 Code AA, K-1 (1065) Box 20 Code AB. The 1099-R box 7 lookup and W-2 box 12 lookup cover the same kind of question for those forms.
Sources
- Instructions for Schedule K-1 (Form 1065) (2025): Box 1, Ordinary Business Income (Loss); Limitations on Losses, Deductions, and Credits; Publicly traded partnerships; Basis Limitations. Read November 2, 2026.
IRS page last reviewed April 30, 2026. Tax year 2025 edition. Line numbers are those printed in the 2025 instructions and can change. Names in worked examples are made up.
Frequently asked questions
What is box 1 on a Schedule K-1 (Form 1065)?
It is your share of the partnership’s ordinary income (loss) from trade or business activities, before any limits on losses that apply to you.
Where does K-1 box 1 go on Form 1040?
On Schedule E (Form 1040), line 28. The column depends on whether you materially participated: column (i) or (k) if you did, column (h) for passive income, and column (g) for the allowed part of a passive loss.
Is box 1 income taxable if the partnership did not distribute it?
The IRS instructions say you may be liable for tax on your share of partnership income whether or not it was distributed, and you include your share on your return if a return is required.
Why is my deductible loss smaller than the box 1 loss?
Losses are limited in order by your basis, the at-risk rules, the passive activity rules and the excess business loss rules. Only the amount that survives all four is deductible this year.
What if item D is checked on my K-1?
The partnership is a publicly traded partnership. The instructions have separate PTP rules, and passive income, gains and losses from a PTP are not reported on Form 8582.
Not tax advice
This page summarizes IRS instructions, mostly written for the people who prepare the form, and is not tax, legal or financial advice. The payer, a CPA or an enrolled agent can confirm what a box or code means for your return. Everything runs in your browser; nothing you enter is sent anywhere.