Schedule K-1 (Form PTE): Owner's Share of Income, Credits, Deductions, ETC. (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
Kentucky Schedule K-1 (Form PTE) reports an owner’s share of a pass-through entity’s income, losses, deductions, credits, and other items for 2024. It also reports the owner’s share of limited liability entity tax (LLET) and apportionment pass-through items.
Who files this form
Owners of a pass-through entity must include their share of the entity’s income on the applicable Kentucky tax return, whether or not the income was distributed.
- Full-year Kentucky residents: Individual filing requirements depend on family size, modified gross income, Kentucky adjusted gross income, and self-employment income. Anyone with self-employment gross receipts above the threshold determined under KRS 141.066 must file Form 740, regardless of adjusted gross income or tax credits claimed. The text does not give a dollar threshold.
- Nonresidents and part-year residents: The instructions require a Kentucky return for nonresidents with Kentucky-source income and part-year residents receiving income while a Kentucky resident or Kentucky-source income while a nonresident. They specify Form 740-NP for individuals with Kentucky-source income and combined gross income from all sources above the threshold determined under KRS 141.066.
- S corporation shareholders: Kentucky resident shareholders must report 100% of their share of income, losses, credits, and deductions. Nonresident shareholders must report the Kentucky business portion unless the entity is withholding on their behalf under KRS 141.206.
- Estates and trusts: Report Schedule K-1 amounts on Form 741 and related schedules.
Pass-through entity income is not exempt under reciprocal agreements between Kentucky and other states.
What you'll need
The schedule asks for the owner’s identifying number, the entity’s FEIN, the Kentucky Corporation/LLET account number, and the owner’s and entity’s names and addresses. It also asks for ownership information and the owner’s share of income, deductions, credits, and other items.
Depending on the items reported, the form calls for:
- Attached schedules for other portfolio income, other income, charitable contributions, portfolio-related deductions, other deductions, and supplemental owner information.
- Federal Form 4562 and Kentucky Form 4562 for the IRC §179 expense deduction.
- Certifications for general partnerships claiming the listed refundable rehabilitation, entertainment incentive, or decontamination credits.
Owners may also need:
- Federal Schedule K-1: Kentucky resident Form 740 filers use federal and Kentucky K-1 amounts to complete the Section E adjustment.
- Federal Form 6198 and the entity’s activity schedule: If at-risk limitations apply.
- Form 8582-K: If Kentucky passive activity loss limitations require it.
- Form 1099-DIV: For actual dividend distributions paid by an S corporation.
Common mistakes
- Transferring amounts without reading the owner’s instructions. The form specifically says to read those instructions before entering Schedule K-1 information on your tax return.
- Overlooking the passive activity adjustment. If Form 8582-K is required, the instructions say to adjust Section A, lines 1 through 3, to exclude income, losses, deductions, or expenses related to a passive activity. Complete the Form 8582-K passive activities adjustment worksheet to determine the adjustment to federal adjusted gross income.
- Calculating the Section E difference incorrectly when losses are involved. If lines 1 and 2 are both losses, subtract the smaller dollar amount from the larger dollar amount and enter the difference on line 3. If one line is income and the other is a loss, add the two dollar amounts to determine the difference.
Questions people ask
Do I report income even if the entity did not pay it to me?
Yes. Owners are liable for tax on their share of pass-through entity income whether or not it was distributed, and must include that share on the applicable Kentucky return.
Where do I find actual S corporation dividend distributions?
The S corporation must report actual dividend distributions to you on Form 1099-DIV. The owner’s instructions say to report them on federal Schedule B (Form 1040).
How does a nonresident use the percentage in Item B(2)?
If Item B(2) is less than 100%, multiply Section A, lines 1 through 6 and 9, the applicable portions of lines 7 and 11, and the portion of line 17(b) actually deducted for the current year by that percentage. Do not apply it to line 12(a) or the portions of lines 8 and 10 that pass through to Schedule A. Those amounts are subject to the percentage on Form 740-NP, page 4, line 34.
Can I deduct every loss shown on my K-1?
Not necessarily. At-risk limitations and passive activity limitations may restrict deductible losses. The instructions refer owners to federal Form 6198 for at-risk limitations and Form 8582-K when Kentucky passive activity loss limitations apply.
Is the LLET credit amount automatically the credit I can claim?
The instructions direct individual owners to use the Kentucky Limited Liability Entity Tax Credit Worksheet in the Form 740, Form 740-NP, or Form 741 instructions to determine the credit allowed. Corporate partners and members use the Corporation LLET Credit Worksheet in the Form 720 instructions.