Kentucky Form 8582-K determines allowable passive activity losses when they differ from federal calculations, using Kentucky-specific income and loss figures instead of federal ones. Taxpayers complete it if federal Form 8582 is required but Kentucky passive income, losses, or prior unallowed losses vary, or to compute additions or subtractions for Kentucky adjusted gross income on Schedule M. Follow federal Form 8582 instructions but substitute Kentucky amounts throughout all parts, including worksheets for separate or combined returns where joint federal activities allocate 50% to each spouse marked as T for taxpayer, S for spouse, or J for joint. Enclose with Form 740, 740-NP, or 741, and use the Passive Activities Adjustment Worksheet to report differences: positive line E as an Other Addition on Schedule M, negative as an Other Subtraction. Complete Parts IV and V first before Part I, treating rental real estate with active participation separately, and handle special $25,000 allowance phases based on modified adjusted gross income up to $150,000 ($75,000 if married filing separately). If line 3 shows net income or zero, skip the form and report losses directly; otherwise, allocate unallowed losses across activities in later parts for accurate reporting on tax schedules.
How to File Form 8582-K
Prepare using Kentucky income and losses after federal Form 8582 if applicable. Complete all parts with federal instructions but Kentucky figures. Enclose with your Kentucky return: Form 740, 740-NP, or 741. Use line 11 for total allowed losses, reporting per instructions for Form 740 filers or federal guidance otherwise. Compute Schedule M adjustments via the Passive Activities Adjustment Worksheet.
How to Complete Kentucky Form 8582-K
Identifying Information
Enter name(s) as shown on tax return.
Write the exact name from your Kentucky tax return.
Social Security or Federal Identification Number
Enter your SSN or FEIN.
Part I: 2026 Passive Activity Loss
Caution: Complete Parts IV and V before completing Part I.
Prepare supporting schedules first.
Rental Real Estate Activities With Active Participation
Line 1a: Activities with net income (from Part IV, column (a))
Enter total net income from Part IV, column (a).
Line 1b: Activities with net loss (from Part IV, column (b))
Enter total net loss from Part IV, column (b). Show in parentheses.
Line 1c: Prior year unallowed losses (from Part IV, column (c))
Enter total prior unallowed losses from Part IV, column (c). Show in parentheses.
Line 1d: Combine lines 1(a) through 1(c)
Add lines 1a, 1b, and 1c.
All Other Passive Activities
Line 2a: Activities with net income (from Part V, column (a))
Enter total net income from Part V, column (a).
Line 2b: Activities with net loss (from Part V, column (b))
Enter total net loss from Part V, column (b). Show in parentheses.
Line 2c: Prior year unallowed losses (from Part V, column (c))
Enter total prior unallowed losses from Part V, column (c). Show in parentheses.
Line 2d: Combine lines 2(a) through 2(c)
Add lines 2a, 2b, and 2c.
Line 3: Combine lines 1(d) and 2(d)
Add lines 1d and 2d. If net income or zero, all losses allowed. Skip Form 8582-K and report directly. If loss and line 1d is loss, go to Part II. If line 2d is loss with line 1d zero or more, go to line 10.
Part II: Special Allowance for Rental Real Estate With Active Participation
Caution: If your filing status is married filing separately and you lived with your spouse at any time during the year, do not complete Part II. Instead, go to line 10.
Skip if applicable.
Note: See federal instructions for how to treat numbers as positive amounts in Part II.
Use positive figures as directed.
Line 4: Enter the smaller of the loss on line 1(d) or the loss on line 3
Enter lesser loss amount.
Line 5: Enter $150,000; $75,000 if married filing separately or separate on a combined return
Enter phaseout threshold.
Line 6: Enter modified adjusted gross income, but not less than zero
Enter MAGI per federal rules. If line 6 equals or exceeds line 5, enter zero on line 9 and skip lines 7 and 8.
Line 7: Subtract line 6 from line 5
Subtract to find remaining allowance.
Line 8: Multiply line 7 by 50% (.5)
Multiply by 0.5, capped at $25,000 ($12,500 if filing separately).
Line 9: Enter the smaller of line 4 or line 8
Enter lesser amount.
Part III: Total Losses Allowed
Line 10: Add the income, if any, on lines 1(a) and 2(a) and enter the total
Total net income from lines 1a and 2a.
Line 11: Total losses allowed from all passive activities for 2025
Add lines 9 and 10. Form 740 filers follow specific instructions; others use federal reporting rules.
Part IV: Complete This Part Before Part I, Lines 1(a), 1(b), and 1(c)
Name of activity
List each rental real estate activity with active participation.
Current Year (d) Gain / (e) Loss
Enter current year gain or loss.
Prior years (a) Net income (line 1a) / (b) Net loss (line 1b) / (c) Unallowed loss (line 1c)
Enter prior year figures per column.
Overall gain or loss
Compute net.
Total. Enter on Part I, lines 1(a), 1(b), and 1(c)
Sum columns (a), (b), (c).
Part V: Complete This Part Before Part I, Lines 2(a), 2(b), and 2(c)
Name of activity
List each other passive activity.
Current Year (d) Gain / (e) Loss
Enter current year gain or loss.
Prior years (a) Net income (line 2a) / (b) Net loss (line 2b) / (c) Unallowed loss (line 2c)
Enter prior year figures per column.
Overall gain or loss
Compute net.
Total. Enter on Part I, lines 2(a), 2(b), and 2(c)
Sum columns (a), (b), (c).
Part VI: Use This Part if an Amount Is Shown on Part II, Line 9
Name of activity
List rental activities eligible for special allowance.
Form or Schedule and line number to be reported on
Specify reporting location.
(a) Loss
Enter total loss per activity.
(b) Ratio
Compute ratio of activity loss to total.
(c) Special allowance
Multiply line 9 by ratio.
(d) Subtract column (c) from column (a)
Find allowed portion.
Total
Sum across activities.
Part VII: Allocation of Unallowed Losses
Name of activity
List activities with unallowed losses.
Form or Schedule and line number to be reported on
Specify location.
(a) Loss
Enter unallowed loss.
(b) Ratio
Compute ratio.
(c) Unallowed loss
Allocate based on ratio.
Total
Sum.
Part VIII: Allowed Losses
Name of activity
List activities.
Form or Schedule and line number to be reported on
Specify.
(a) Loss
Enter loss.
(b) Ratio
Compute.
(c) Allowed loss
Allocate.
Total
Sum.
Part IX: Activities With Losses Reported on Two or More Forms or Schedules
Name of activity
List per activity set.
Form or schedule and line number to be reported on
Specify for each.
1a: Net loss plus prior year unallowed loss from form or schedule
Enter combined loss.
1b: Net income from form or schedule
Enter income.
1c: Subtract line 1b from line 1a. If zero or less, enter -0-
Compute net loss.
(c) Ratio / (d) Unallowed Loss / (e) Allowed Loss
Allocate per instructions.
Total
Sum ratios to 1.00.
Passive Activities Adjustment Worksheet
A: Enter as a negative amount Kentucky allowable losses from line 11, Form 8582-K
Enter line 11 as negative.
B: Enter as a positive amount federal allowable losses from federal Form 8582
Enter federal line 11 (or AGI-included losses if no federal form).
C: Enter as a positive amount Kentucky passive income from line 10, Form 8582-K
Enter line 10.
D: Enter as a negative amount federal passive income from federal Form 8582
Enter federal line 10 (or AGI-included income if no federal form).
E: Passive income or loss adjustment. Combine lines A, B, C and D
Total. Positive to Schedule M Other Addition; negative to Other Subtraction.