PA-20S/PA-65 Schedule M: 2025 PA Schedule M - Reconciliation of Federal-Taxable Income (Loss) to PA-Taxable Income (Loss) (PA-20S/PA-65 M) (2025)
Pennsylvania · Pennsylvania DOR · Used for tax years 2025
Pennsylvania Schedule M reconciles federal taxable income or loss to Pennsylvania taxable income or loss for the PA-20S/PA-65 Information Return. It classifies federal Schedule K income into Pennsylvania income classes and reports adjustments to business and rental or royalty inc
Who files this form
All entities filing the PA-20S/PA-65 Information Return must file Schedule M, even if they have no adjustments to federal income or loss.
Schedule M classifies federal income for Pennsylvania purposes and determines Pennsylvania business and rental/royalty income or loss. Business activity and rental/royalty activity must be reconciled on separate copies of Part II.
What you'll need
- Federal Schedule K from Form 1065 or Form 1120S. Part I uses the income and loss amounts reported on this schedule.
- Your PA-20S/PA-65 Information Return. Use the same business name and nine-digit federal employer identification number (FEIN). Schedule M also asks for a PA Sales Tax License Number.
- Related Pennsylvania schedules, when applicable. Use Schedules A, B and D to adjust interest, dividend and gain or loss income, respectively.
- Itemized statements for applicable adjustments. The form requires statements for other income adjustments and other expense adjustments in Part II.
- REV-1190 for taxes paid on income reported in Part II, Section V, Line a. Include the entity name, FEIN and tax year on REV-1190.
- Schedule I, if applicable. The instructions use amounts from Schedule I for intangible drilling cost adjustments.
Common mistakes
- Using Part II for the wrong income classes. Use Schedules A, B and D for interest, dividends and gains or losses from property sales. The instructions warn that using Part II for these classes causes classification and reporting errors.
- Apportioning rental income. Rental income must be allocated between Pennsylvania and outside Pennsylvania, not apportioned. Part II, Section I, Box 2 must show total worldwide rental income.
- Leaving out itemized statements. The instructions warn that adjustments in Part II, Section III, Line d and Section VI, Line i may be denied without the required itemized statements.
- Counting sales tax twice. If you deduct sales tax on depreciable assets in Part II, Section VI, Line b, do not also add it to the asset's depreciable basis for Pennsylvania purposes.
- Deducting shareholder health insurance twice. If the expense is already included in Part I, Line 1, Column (a), it cannot also be deducted in Part II, Section VI, Line e.
Questions people ask
Do I need Schedule M if there are no federal-to-Pennsylvania adjustments?
Yes. All entities must file Schedule M whether or not they have adjustments to federal income or loss.
Should I adjust federal amounts when completing Part I?
No. Classify the federal Schedule K income or loss into Pennsylvania income classes without adjustment. The total of the specific federal line items should equal the total of the federal schedule.
Can I combine business and rental income on one Part II?
No. Determine business activity income or loss on a separate Part II from rental/royalty activity income or loss.
Should I enter cents in Part II?
No. The form says to enter whole dollars only.
Does Pennsylvania allow federal bonus depreciation?
No. Pennsylvania does not allow bonus depreciation. The instructions explain how to adjust federal depreciation to the amount Pennsylvania allows.