Owners of rental properties, take note: your reporting requirements are changing for the 2025 tax year.

The IRS recently released a draft version of Form 8825 and its instructions, revealing a few changes to what’s required. One of the changes will affect all taxpayers, but there are two changes that will only affect certain larger rental real estate businesses — but we’ll get into that later.

To better understand what changed from last year and what you’ll be expected to do this tax season, let’s answer the following questions:

• How did Form 8825, Rental Real Estate Income and Expenses of a Partnership or S Corporation, change?
• Why did the IRS create a new Schedule A for Form 8825?
• What can you do to prepare for the changes?

How did Form 8825 change?

The IRS released draft versions of Form 8825 and its instructions. Here are the key updates for 2025:

1.  “Other income” must be reported separately from “gross rents.”

On Line 2 of the draft new tax form, the IRS instructs taxpayers to list gross rents separately from any other income they may earn. On the prior year’s tax form, non-rental income was generally grouped with gross rents. Under the new format, any revenue that isn’t base rent must be itemized on Form 8825.

Non-rental income could include : late fees, application fees, tenant reimbursements, trash or snow removal fees, replacement key fob fees, and income from amenities such as parking, laundry, or vending machines.

2.  New Schedule A is now required for M-3 filers.

The face of Form 8825 itemizes common expenses — such as advertising, cleaning and maintenance, insurance, repairs, and utilities. The last line item in the expenses section was a catch-all category called “Other.” In prior years, taxpayers would report all remaining expenses on this line of the tax form, grouping them into whatever categories they saw fit. Beginning in 2025, some taxpayers will be forced to report those additional expense on a new Schedule A, instead.

The new Schedule A , replaces the “other” line with 20 expense categories. Expenses such as asset management fees, building maintenance, contract services, common charges, Section 481(a) adjustments, and prepayment penalties must now be listed on Schedule A rather than summarized on a taxpayer-prepared schedule.

Essentially, this new requirement provides more transparent, standardized reporting about a rental business’s expenses. This won’t change what you’re deducting, but it could change how those deductions must be grouped and reported.

This new Schedule A isn’t a requirement for all rental businesses, though; it’s only required for partnerships and S corporations that have an M-3 filing requirement. Partnerships and S corporations are required to file Schedule M-3 if they have assets that are $10 million or greater at the end of the tax year (along with a few other triggering events). In effect, this makes Schedule A only a requirement for large rental real estate businesses, or businesses with high-dollar properties.

3.  New gain/loss codes are now required for M-3 filers.

The first section of Form 8825 is for reporting basic information about each rental property — its address, the type of property, fair rental days, and personal use days. The new tax form requires M-3 filers to designate when that property has been involved in some type of acquisition or distribution. These new codes help the IRS identify changes in a property’s basis. Following is a listing of the new codes:

A—Nontaxable contribution (sections 721 and 351)
B—Other exchange (sections 1031, 1033, etc.)
C—Taxable acquisition (section 1012)
D—New construction/renovation or other basis addition/subtraction
E—Reserved for future use
F—Nontaxable distribution (section 731)
G—Taxable disposition (section 1001 gain/loss)
H—Abandonment
I—Other/supplement

Similar to the new Schedule A requirement, only M-3 filers are required to fill in this section of Form 8825.

Why did the IRS create a new Schedule A for Form 8825?

The IRS hasn’t released any official statement for why it is adding the Schedule A requirement for M-3 filers, but the revisions suggest that the IRS is shifting towards more granular, transparent, and consistent reporting for partnership and S corporation landlords.

For years, taxpayers could group unrelated expenses together in the “Other” deductions section of Form 8825. This new Schedule A gives the IRS more granular detail about rental expenses, providing the IRS with enhanced visibility into these expenses.

But why do we think the IRS is focused on M-3 filers rather than all taxpayers?

Again, while we cannot state this with certainty, it is reasonable to infer that the IRS regards M-3 filers as entities characterized by greater complexity and larger economic impact. M-3 filers typically represent high-volume or high-value rental operations, and the IRS has demonstrated a clear interest in gaining greater visibility into the activities of these larger pass-through entities. Requiring these taxpayers to itemize specific rental expenses — in addition to providing detailed book-to-tax differences on Schedule M-3 — ensures the IRS a consistent level of granularity throughout the return.

What can you do to prepare for the changes?

These changes reflect a broader trend across the tax landscape: the IRS is seeking greater transparency from larger entities. For M-3 filers, this may require adjustments in how expenses are tracked and grouped. Now is an ideal time to review the new Schedule A categories, accurately map expenses, and confirm that your chart of accounts aligns with the required breakouts.

And for all taxpayers, we encourage you to ensure your income and expenses are properly categorized all deductible expenses are captured, and your documentation is complete ahead of the 2025 filing season. Should you have any questions about this new filing requirement, please reach out to your Meaden & Moore tax advisor.