Schedule K-1 (Form PTE): Owner's Share of Income, Credits, Deductions, ETC. (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
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 2025. 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 to them.
- 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 exceeding the threshold determined under KRS 141.066 must file Form 740. The text does not give a dollar amount for that 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. Individuals with Kentucky-source income and combined gross income from all sources exceeding the threshold under KRS 141.066 must file Form 740-NP.
- S corporation shareholders: Kentucky resident shareholders report 100% of their share of income, losses, credits, and deductions. Nonresident shareholders report the Kentucky business portion unless the entity is withholding for them 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
Depending on the items reported, the form calls for these supporting documents:
- Schedules for other portfolio income, other income, charitable contributions, portfolio-related deductions, other deductions, and supplemental information for owners.
- Federal Form 4562 and Kentucky Form 4562 for the Section 179 expense deduction.
- Certifications for the general partnership refundable credits listed on lines 14 through 16: certified rehabilitation, Kentucky Entertainment Incentive, and decontamination.
Owners may also need:
- Federal Schedule K-1: Kentucky residents filing Form 740 use federal and Kentucky K-1 amounts to complete Section E.
- Federal Form 6198 and the entity’s at-risk activity schedule: These may be needed to determine an allowable loss when at-risk limitations apply.
- Form 8582-K: This may be required if passive activity loss limitations apply.
- Form 1099-DIV: An S corporation must report actual dividend distributions to shareholders on this form.
Common mistakes
- Using K-1 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.
- Entering a six-digit Kentucky Corporation/LLET account number without leading zeros. The form requires nine digits. Add leading zeros if the number has six digits.
- Missing the passive activity adjustment. The instructions note that, if Form 8582-K is required, Section A, lines 1 through 3 must exclude income, losses, deductions, or expenses related to a passive activity. Complete the Form 8582-K passive activities adjustment worksheet.
- Calculating the Section E difference incorrectly when losses are involved. The caution says that if lines 1 and 2 are both losses, subtract the smaller dollar amount from the larger. If one is income and the other is a loss, add the two dollar amounts to determine the difference for line 3.
Questions people ask
Do I report income if the entity did not pay it out to me?
Yes. Owners must include their share of pass-through entity income on the applicable Kentucky return whether or not it was distributed.
Does another state’s reciprocal agreement exempt this income?
No. The instructions state that pass-through entity income is not exempted by reciprocal agreements between Kentucky and any other state.
What is Section E used for?
Kentucky resident owners filing Form 740 use Section E to determine the net difference between federal and Kentucky Schedule K-1 amounts. If line 1 is greater than line 2, the difference is an addition on Schedule M, line 2. If line 2 is greater, the difference is a subtraction on Schedule M, line 11.
Should a nonresident multiply every deduction by the percentage in Item B(2)?
No. Line 12(a) and the portions of lines 8 and 10 that pass through to Schedule A of Form 740-NP should not be multiplied by Item B(2). Those amounts use the percentage on Form 740-NP, page 4, line 34 instead.
Where do I find the worksheet for an individual owner’s LLET credit?
The Kentucky Limited Liability Entity Tax Credit Worksheet is in the Form 740, Form 740-NP, or Form 741 instructions under Business Incentives and Other Tax Credits.