Instructions for Form 8866

Instructions for Form 8866

(Rev. December 2025)

Interest Computation Under the Look-Back Method for Property Depreciated Under

the Income Forecast Method

Section references are to the Internal Revenue Code unless

otherwise noted.

General Instructions

Future Developments

For the latest information about developments related to

Form 8866 and its instructions, such as legislation enacted

after they were published, go to IRS.gov/Form8866.

What’s New

Electronic payments. If you have access to U.S. banking

services or electronic payment systems, you should use

direct deposit for any refunds and pay electronically for any

payments, whenever possible.

Direct deposit. Direct deposit fields have been added

onto the form on lines 9b, 9c, and 9d. If there is net interest to

be refunded to you on line 9a, enter your direct deposit

information on lines 9b through 9d. See Line 9a, later, for

more information.

Purpose of Form

Use Form 8866 to figure the interest due or to be refunded

under the look-back method of section 167(g)(2) for property

placed in service after September 13, 1995, that is

depreciated under the income forecast method as described

in section 167(g).

The income forecast method generally is limited to

depreciation of:

• Motion picture films,

• Video tapes,

• Sound recordings,

• Copyrights,

• Books, and

• Patents.

Who Must File

General Rule

You generally must file Form 8866 to figure interest under the

look-back method for each recomputation year for property

placed in service after September 13, 1995, that you

depreciate under the income forecast method.

Exception. The look-back method does not apply for any

property that had an unadjusted basis (total capitalized cost)

of $100,000 or less at the end of the recomputation year.

Recomputation Year

A recomputation year is generally the 3rd and 10th tax years

after the tax year in which the property was placed in service.

Exception. A tax year is not a recomputation year for the

property if, for each year before the recomputation year, the

actual income from the property is within 10% of the

Jan 23, 2026

estimated income taken into account in determining the

depreciation deduction for the property under the income

forecast method.

Additional Costs

Any costs incurred after the property was placed in service

(that is not treated as separate property—see below) are

taken into account by discounting (using the federal mid-term

rate determined under section 1274(d) as of the time the cost

was incurred) the cost to its value as of the date the property

was placed in service. However, you may elect not to apply

this discounting rule to any property.

Separate property. The following costs are treated as

separate property.

• Any costs incurred related to any property after the 10th

tax year after the tax year the property was placed in service.

• Any other costs incurred if they are significant and give rise

to a significant increase in the income from the property

which was not included in the estimated income from the

property.

Pass-Through Entities

A pass-through entity (partnership, S corporation, or trust)

that is not closely held must apply the look-back method at

the entity level to any property for which substantially all of

the gross income is from U.S. sources. A pass-through entity

is considered closely held if, at any time during any tax year

for which there is income related to the property, 50% or

more (by value) of the beneficial interests in the entity is held

(directly or indirectly) by or for five or fewer persons. For this

purpose, rules similar to the constructive ownership rules of

section 1563(e) apply.

If you are an owner of an interest in a pass-through entity

in which any property was depreciated under the income

forecast method and the entity is not subject to the look-back

method at the entity level for that property, you must file this

form for your tax year that ends with or includes the end of

the entity’s recomputation year. The pass-through entity will

provide on Schedule K-1 the information you need to

complete this form.

Change of Taxpayer

If the taxpayer deducting depreciation under the income

forecast method changes prior to the recomputation year, the

taxpayer as of the end of the recomputation year will be

responsible for the payment of interest, if any, due for any

year in which the property was depreciated under the income

forecast method. Generally, only the taxpayer that had

depreciated property under the income forecast method in a

year that an overpayment occurred may request a refund of

interest on the overpayment.

Instructions for Form 8866 (Rev. 12-2025) Catalog Number 26332N

Department of the Treasury Internal Revenue Service www.irs.gov

Filing Instructions

Interest You Owe (or No Interest Is To Be

Refunded to You)

If you owe interest, or no interest is to be refunded to you,

attach Form 8866 to your income tax return. You do not have

to sign Form 8866 and the paid preparer section does not

have to be completed.

For taxpayers other than partnerships and S corporations,

include any interest due in the appropriate line on your return

(for example, 2025 Schedule 2 (Form 1040), Part II, line 17n;

or 2025 Form 1120, Schedule J, line 9d, etc.).

For partnerships, include any interest due on Form 1065,

line 25. If paying by check or money order make it payable for

the full amount to “United States Treasury.” Write the

partnership’s employer identification number (EIN), daytime

phone number, and “Form 8866 Interest” on the check or

money order. See the Instructions for Form 1065 for

electronic payment options.

For S corporations, include any interest due in the amount

entered for additional taxes (for example, 2025 Form 1120-S,

line 23c). Write on the dotted line to the left of the entry space

“From Form 8866” and the amount of interest due.

Interest To Be Refunded to You

If interest is to be refunded to you, do not attach Form 8866 to

your income tax return. Instead, file Form 8866 separately

with the IRS at the applicable address listed below.

• Individuals:

Department of Treasury

Internal Revenue Service

Philadelphia, PA 19255-0001

• All others:

Department of Treasury

Internal Revenue Service

Cincinnati, OH 45999-0001

Complete the Signatures section on Form 8866 following

the instructions for the Signature section of your income tax

return. If you file a joint return, the signature of both spouses

is required on Form 8866. A paid preparer also must

complete the Signatures section. If additional Forms 8866

are needed (to show more than 2 prior tax years), sign only

the first Form 8866.

File Form 8866 by the date you are required to file your

income tax return (including extensions). Keep a copy of

Form 8866 and any attached schedules for your records.

Filing a Corrected Form 8866

You must file a corrected Form 8866 only if the amount

shown on line 6 for any prior year changes as a result of an

error you made, an income tax examination, or the filing of an

amended tax return.

When completing line 1 of the corrected Form 8866, follow

the instructions on the form but do not enter the adjusted

taxable income from line 3 of the original Form 8866. When

completing line 5 of the corrected Form 8866, do not include

the interest due, if any, from line 10 of the original Form 8866

that was included in your total tax when Form 8866 was filed

with your tax return.

• If both the original and corrected Forms 8866 show interest

you owe, file an amended income tax return following the

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filing instructions, earlier, and the amended return

instructions for your tax return.

• If both the original and corrected Forms 8866 show interest

to be refunded to you, write “Amended” in the top margin of

the corrected Form 8866, and file it separately following the

filing instructions, earlier.

• If your original Form 8866 shows interest you owe and the

corrected Form 8866 shows interest to be refunded to you,

you must:

1. File an amended tax return showing $0 interest from

Form 8866, and

2. File the corrected Form 8866 separately (but do not

write “Amended” at the top of the form because this is the first

Form 8866 that you will file separately for this recomputation

year). Follow the filing instructions, earlier, and the amended

return instructions for your tax return.

• If the original Form 8866 shows interest to be refunded to

you and the corrected Form 8866 shows interest you owe,

you must:

1. File the corrected Form 8866 separately (with

“Amended” written at the top) showing $0 interest to be

refunded, and

2. File an amended income tax return and attach a copy

of the corrected Form 8866. Follow the filing instructions,

earlier, and the amended return instructions for your tax

return.

Attachments

If you need more space, attach separate sheets to the back

of Form 8866. Put your name and identifying number on each

sheet.

Specific Instructions

Recomputation Year

Fill in the recomputation year line at the top of the form to

show the tax year for which this form is being filed. If you

were an owner of an interest in a pass-through entity that has

depreciated one or more properties under the income

forecast method, enter your tax year that ends with or

includes the end of the entity’s recomputation year.

Name

Enter the name shown on your federal income tax return for

the recomputation year. If you are an individual filing a joint

return, also enter your spouse’s name as shown on Form

1040.

Address

Enter your address only if you are filing this form separately.

Include the apartment, suite, room, or other unit number after

the street address.

P.O. Box

Enter your box number instead of your street address only if

your post office does not deliver mail to your home.

Foreign Address

Enter the information in the following order: city, province or

state, and country. Follow the country’s practice for entering

the postal code. Please do not abbreviate the country name.

Instructions for Form 8866 (Rev. 12-2025)

Identifying Number

If you are an individual, enter your social security number.

Other filers must use their EIN.

Recomputation year column

Enter the month and year for the recomputation year listed at

the top of this form.

Columns (a) and (b)

Enter at the top of each column the ending month and year

for:

• Each tax year prior to the recomputation year in which you

depreciated property under the income forecast method to

which this form applies, and

• Any other tax year affected by such years.

Note: If there are more than 2 prior tax years, attach

additional Forms 8866 as needed. On the additional Forms

8866, enter your name, identifying number, and tax year.

Complete lines 1 through 8 (as applicable), but do not enter

totals in column (c). Enter totals only in column (c) of the first

Form 8866.

Line 1

Do not reduce taxable income or increase a loss on line 1 by

any carryback of a net operating loss, net section 1256

contracts loss, or capital loss, except to the extent that

carryback resulted from, or was adjusted by, the

redetermination of depreciation under the income forecast

method for look-back purposes.

Note: The 2-year carryback rule does not apply to net

operating losses arising in the tax years ending after 2017.

An exception applies to farmers and non-life insurance

companies. See section 172(b) as amended by P.L. 115-97,

section 13302.

Line 2

In each column, show a net increase to taxable income as a

positive amount and a net decrease as a negative amount.

In figuring the net adjustment to be entered in each

column on line 2, be sure to take into account any other

income and expense adjustments that may result from the

increase (or decrease) to depreciation under the income

forecast method (for example, for an individual, a change to

adjusted gross income may affect medical expenses).

If there are no adjustments besides the look-back

adjustments, the sum of all line 2 amounts should be zero

and reflected in column 2(c). If there are additional

adjustments that result from the application of the look-back,

leave column 2(c) blank and reflect the amounts in the

schedule below as described in item 3.

Include the following on an attached schedule.

1. Identify each property depreciated under the income

forecast method to which this form applies.

2. For each property, report in columns for each prior

year: (a) the amount of depreciation previously deducted

based on estimated future income and (b) the amount of

depreciation allowable for each prior year based on actual

income earned before the end of the recomputation year and

estimated future income to be earned after the recomputation

year. Total the columns for each prior year and show the net

adjustment to depreciation.

Instructions for Form 8866 (Rev. 12-2025)

3. Identify any other adjustments that result from a

change in depreciation under the income forecast method

and show the amounts in the columns for the affected years

so that the net adjustment shown in each column on the

attached schedule agrees with the amounts shown on line 2.

An owner of an interest in a pass-through entity is not

required to provide the detail listed in 1 and 2 with respect to

prior years. The entity should provide the line 2 amounts with

Schedule K-1 or on a separate statement for its

recomputation year.

Note: Taxpayers reporting line 2 amounts from more than

one Schedule K-1 (or a similar statement) must attach a

schedule detailing by entity the net change to depreciation

under the income forecast method.

Line 3

If line 3 results in a negative amount, it represents a

look-back net operating loss (NOL). The adjustment in line 2

either created, increased, or decreased the net operating

loss. The change in the amount of the net operating loss

would be carried back or forward to the appropriate tax year

and the hypothetical tax would be recomputed in the

carryback/forward year. However, the computation period for

computing interest on NOLs is different. See the exceptions

listed on Lines 7 and 8 below.

Note: The 2-year carryback rule does not apply to net

operating losses arising in tax years ending after 2017. An

exception applies to farmers and non-life insurance

companies. See section 172(b) as amended by P.L. 115-97,

section 13302.

Lines 4 and 5

Reduce the tax liability to be entered on lines 4 and 5 by

allowable credits (other than refundable credits, for example,

the credit for taxes withheld on wages, the earned income

credit, the additional child tax credit, the credit for federal tax

paid on fuels, etc.), but do not take into account any credit

carrybacks to the prior year in computing the amount to enter

on lines 4 and 5 (except to the extent of carrybacks that

resulted from or were adjusted by the redetermination of

depreciation for look-back purposes). Include on lines 4 and

5 any taxes (such as alternative minimum tax) required to be

taken into account in the computation of your tax liability (as

originally reported or as redetermined).

Line 6

Pass-through entities. Multiply the amount on line 2 by the

applicable regular tax rate for each prior year shown in

column (a) or (b). The applicable regular tax rate is as

follows.

1. Pass-through entities in which, at all times during the year,

more than 50% of the interests in the entity are held by

individuals directly or through other pass-through entities.

The rates for tax years beginning:

a. In 2000 or earlier . . . . . . . . . . . . . . . . .

b. In 2001 . . . . . . . . . . . . . . . . . . . . . . . .

c. In 2002 . . . . . . . . . . . . . . . . . . . . . . .

d. In 2003 through 2012 . . . . . . . . . . . . .

e. In 2013 through 2017 . . . . . . . . . . . . . .

f. In 2018 or later . . . . . . . . . . . . . . . . . . .

39.6%

39.1%

38.6%

35.0%

39.6%

37.0%

3

2. All other pass-through entities not included in 1 above:

a. In 2017 or earlier . . . . . . . . . . . . . . . . .

b. In 2018 or later . . . . . . . . . . . . . . . . . .

35%

21%

Lines 7 and 8

For the increase or decrease in tax for each prior year,

interest due or to be refunded must be computed at the

applicable interest rate and compounded on a daily basis,

generally from the due date (not including extensions) of the

return for the prior year until the earlier of:

• The due date (not including extensions) of the return for

the recomputation year, or

• The date the return for the recomputation year is filed and

any income tax due for that year has been fully paid.

Exceptions

• If a net operating loss, capital loss, net section 1256

contracts loss, or credit carryback is being increased or

decreased as a result of the adjustment made to net income

due to refiguring depreciation under the income forecast

method, the interest due or to be refunded must be computed

on the increase or decrease in tax attributable to the change

to the carryback only from the due date (not including

extensions) of the return for the prior year that generated the

carryback and not from the due date of the return for the year

in which the carryback was absorbed. See section 6611(f).

• In the case of a decrease in tax on line 6, if a refund has

been allowed for any part of the income tax liability shown on

line 5 for any year as a result of a net operating loss, capital

loss, net section 1256 contracts loss, or credit carryback to

such year, and the amount of the refund exceeds the amount

on line 4, interest is allowed on the amount of such excess

only until the due date (not including extensions) of the return

for the year in which the carryback arose.

Note: If a different method of interest computation must be

used to produce the correct result in your case, use that

method and attach an explanation of how the interest was

computed.

Applicable Interest Rates

The overpayment rate designated under Section 6621 is

used to calculate the interest for both hypothetical

overpayments and underpayments. The applicable interest

rates are published quarterly in revenue rulings in the Internal

Revenue Bulletin available at IRS.gov.

However, for depreciation deducted in tax years ending

after August 5, 1997, an interest rate is determined for each

interest accrual period. The interest accrual period starts on

the day after the return due date (not including extensions)

for each prior tax year and ends on the return due date for the

following tax year. The interest rate in effect for the entire

interest accrual period is the overpayment rate determined

under section 6621(a)(1) applicable on the first day of the

interest accrual period.

Even though the interest rates change quarterly, for

look-back purposes the interest rate stays the same for the

accrual period which is generally one year. The applicable

interest rates for non-corporate taxpayers are shown in

Table 1 (for interest accrual periods beginning after Jan. 1,

2015).

4

The applicable interest rates for corporate taxpayers for

the first $10,000 are shown in Table 2. The applicable interest

rates for corporate taxpayers for amounts in excess of

$10,000 are shown in Table 3.

Line 9a

Additional interest to be refunded for periods after the due

date of the return, if any, will be computed by the IRS and

included in your refund. Report the amount on line 9a (or the

amount refunded by the IRS, if different) as interest income

on your income tax return for the tax year in which it is

received or accrued.

Direct deposit. If you have access to U.S. banking services,

you should use direct deposit for any refunds, whenever

possible. The benefits of a direct deposit include a faster

refund, the added security of a paperless payment, and the

savings of tax dollars associated with the reduced processing

costs.

If you want your refund directly deposited into your

checking or savings account at any U.S. bank or other

financial institution, complete lines 9b through 9d. See the

instructions for lines 9b, 9c, and 9d, later.

You are not eligible to request a direct deposit if:

• The receiving financial institution is a foreign bank or a

foreign branch of a U.S. bank, or

• You have applied for an EIN but are filing your tax return

before receiving one.

Line 9b. Routing Number

The routing number must be nine digits. The first two digits

must be 01 through 12 or 21 through 32. Ask your financial

institution for the correct routing number to enter on line 9b if:

• The routing number on a deposit slip is different from the

routing number on your checks,

• Your deposit is to a savings account that does not allow

you to write checks, or

• Your checks state they’re payable through a financial

institution different from the one at which you have your

checking account.

Line 9c. Type of Account

Check the appropriate box for the type of account. Do not

check more than one box. You must check the correct box to

ensure your deposit is accepted. If you are unsure which box

to check for the account you wish the deposit to be applied

to, consult your financial institution.

Line 9d. Account Number

The account number can be up to 17 characters (both

numbers and letters). Include hyphens but omit spaces and

special symbols. Enter the number from left to right and leave

any unused boxes blank. If the direct deposit to your account

is different from the amount you expected, you’ll receive an

explanation in the mail about 2 weeks after your refund is

deposited.

Conditions Resulting in a Refund by Check

If the IRS is unable to process the request for a direct

deposit, a refund by check will be generated instead.

Reasons for not processing a request are as follows.

• The name on the tax return does not match the name on

the account.

• The financial institution rejects the direct deposit because

of an incorrect routing or account number.

Instructions for Form 8866 (Rev. 12-2025)

• You fail to indicate the type of account the deposit is to be

made to (that is, checking or savings).

Note: The IRS is not responsible for a lost refund if you enter

the wrong account information. Check with your financial

institution to get the correct routing and account numbers and

to make sure the direct deposit will be accepted.

Line 10

Corporations (other than S corporations) may deduct this

amount (or the amount computed by the IRS, if different) as

interest expense for the tax year in which it is paid or

incurred. For individuals and other taxpayers, this interest is

not deductible.

Table 1

Interest Rates for Non-corporate Taxpayers

From

1/1/15

1/1/16

4/1/16

1/1/17

4/1/18

1/1/19

7/1/19

1/1/20

7/1/20

1/1/21

4/1/22

7/1/22

10/1/22

1/1/23

10/1/23

1/1/24

1/1/25

Through

12/31/15

3/31/16

12/31/16

3/31/18

12/31/18

6/30/19

12/31/19

6/30/20

12/31/20

3/31/22

6/30/22

9/30/22

12/31/22

9/30/23

12/31/23

12/31/24

3/31/26

Rate

3%

3%

4%

4%

5%

6%

5%

5%

3%

3%

4%

5%

6%

7%

8%

8%

7%

Table

11

59

61

13

15

17

15

63

59

11

13

15

17

19

21

69

19

Page

565

613

615

567

569

571

569

617

613

565

567

569

571

573

575

623

573

Table 2

Interest Rates for Corporate Increases or Decreases

in Tax of $10,000 or Less

From

1/1/15

1/1/16

4/1/16

1/1/17

4/1/18

1/1/19

7/1/19

1/1/20

7/1/20

1/1/21

4/1/22

7/1/22

10/1/22

1/1/23

10/1/23

1/1/24

1/1/25

Through

12/31/15

3/31/16

12/31/16

3/31/18

12/31/18

6/30/19

12/31/19

6/30/20

12/31/20

3/31/22

6/30/22

9/30/22

12/31/22

9/30/23

12/31/23

12/31/24

3/31/26

Rate

2%

2%

3%

3%

4%

5%

4%

4%

2%

2%

3%

4%

5%

6%

7%

7%

6%

Table

9

57

59

11

13

15

13

61

57

9

11

13

15

17

19

67

17

Page

563

611

613

565

567

569

567

615

611

563

565

567

569

571

573

621

571

Table 3

Interest Rates for Corporate Increases or Decreases

in Tax Exceeding $10,000

From

1/1/15

4/1/16

1/1/17

4/1/18

1/1/19

7/1/19

1/1/20

7/1/20

4/1/22

7/1/22

10/1/22

1/1/23

10/1/23

1/1/24

1/1/25

Through

3/31/16

12/31/16

3/31/18

12/31/18

6/30/19

12/31/19

6/30/20

3/31/22

6/30/22

9/30/22

12/31/22

9/30/23

12/31/23

12/31/24

3/31/26

Rate

0.5%

1.5%

1.5%

2.5%

3.5%

2.5%

2.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

5.5%

4.5%

Table

Page

–

56

8

10

12

10

58

–

8

10

12

14

16

64

14

–

610

562

564

566

564

612

–

562

564

566

568

570

618

568

Privacy Act and Paperwork Reduction Act Notice. We

ask for the information on this form to carry out the Internal

Revenue laws of the United States. We need it to ensure that

you are complying with these laws and to figure and collect or

refund the correct amount of interest. Section 167(g)

provides special rules for computing interest under the

look-back method for property depreciated under the income

forecast method. Sections 6001 and 6109 and their

regulations require you to provide this information, including

your identifying number, if this provision applies to you. If you

do not file Form 8866, do not provide the information we ask

for, or provide fraudulent information, you may forfeit any

refund of interest otherwise owed to you and be subject to

other penalties.

You are not required to provide the information requested

on a form that is subject to the Paperwork Reduction Act

unless the form displays a valid OMB control number. Books

or records relating to a form or its instructions must be

retained as long as their contents may become material in the

administration of any Internal Revenue law. Generally, tax

returns and return information are confidential, as required by

section 6103. However, section 6103 sometimes permits or

requires us to disclose this information.

We may give the information to the Department of Justice

and to other federal agencies, as provided by law. We may

give it to cities, states, the District of Columbia, and U.S.

commonwealths or possessions to carry out their tax laws.

We may give it to foreign governments because of tax treaties

they have with the United States. We also may disclose this

information to federal and state agencies to enforce federal

nontax criminal laws and to combat terrorism.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

burden for individual filers is approved under OMB control

number 1545-0074, tax exempt filers is approved under OMB

control number 1545-0047, business filers is approved under

OMB control number 1545-0123, and estate and trust filers is

approved under OMB control number 1545-0092, for the

estimated averages, see the instructions for your income tax

return.

If you have comments concerning the accuracy of these

time estimates or suggestions for making this form simpler,

we would be happy to hear from you. See the instructions for

the tax return with which this form is filed.

You can send us comments through IRS.gov/

FormComments. Write to the Internal Revenue Service, Tax

Instructions for Form 8866 (Rev. 12-2025)

5

Forms and Publications, 1111 Constitution Ave. NW,

IR-6526, Washington, DC 20224. Do not send the tax form to

this office. Instead, see Filing Instructions, earlier.

6

Instructions for Form 8866 (Rev. 12-2025)