Instructions for Form 8866

(Rev. November 2018)

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

the Income Forecast Method

Department of the Treasury

Internal Revenue Service

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

The tax rate used for the interest 

computation for individuals, 

corporations, and certain pass-through 

entities has changed. See the 

instructions for line 6, later.

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 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.

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, include any interest due in 

the amount to be entered for total tax 

(after credits and other taxes) on your 

return (for example, 2018 Form 1040, 

line 15; or 2018 Form 1120, Schedule J, 

line 9d, etc.). Next to the entry space, 

write “From Form 8866” and the amount 

of interest due.

For partnerships, write “From Form 

8866” and any interest due in the 

bottom margin of the tax return, and 

attach a check or money order for the 

full amount payable 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.

Sep 24, 2018 Cat. No. 26332N
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 Signature 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 Signature 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 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.

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 

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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.

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 ..... 39.6%

b. In 2001 ............ 39.1%

c. In 2002 ........... 38.6%

d. In 2003 through 

2012 ............... 35.0%

e. In 2013 through 

2017 ............... 39.6%

f. In 2018 or later ....... 37.0%

2. All other pass-through entities not 

included in 1 above:

a. In 2017 or earlier ..... 35%

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

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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, 2008).

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 9

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 9 (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.

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 Through Rate Table Page

1/1/08 3/31/08 7% 67 621

4/1/08 6/30/08 6% 65 619

7/1/08 9/30/08 5% 63 617

10/1/08 12/31/08 6% 65 619

1/1/09 3/31/09 5% 15 569

4/1/09 12/31/10 4% 13 567

1/1/11 3/31/11 3% 11 565

4/1/11 9/30/11 4% 13 567

10/1/11 12/31/11 3% 11 565

1/1/12 12/31/12 3% 59 613

1/1/13 12/31/15 3% 11 565

1/1/16 3/31/16 3% 59 613

4/1/16 12/31/16 4% 61 615

1/1/17 3/31/18 4% 13 567

4/1/18 9/30/18 5% 15 569

Table 2

Interest Rates for Corporate 

Increases or Decreases in Tax of 

$10,000 or Less

 From Through Rate Table Page

1/1/08 3/31/08 6% 65 619

4/1/08 6/30/08 5% 63 617

7/1/08 9/30/08 4% 61 615

10/1/08 12/31/08 5% 63 617

1/1/09 3/31/09 4% 13 567

4/1/09 12/31/10 3% 11 565

1/1/11 3/31/11 2% 9 563

4/1/11 9/30/11 3% 11 565

10/1/11 12/31/11 2% 9 563

1/1/12 12/31/12 2% 57 611

1/1/13 12/31/15 2% 9 563

1/1/16 3/31/16 2% 57 611

4/1/16 12/31/16 3% 59 613

1/1/17 3/31/18 3% 11 565

4/1/18 9/30/18 4% 13 567

Table 3 

Interest Rates for Corporate 

Increases or Decreases in Tax 

Exceeding $10,000

 From Through Rate Table Page

1/1/08 3/31/08 4.5% 62 616

4/1/08 6/30/08 3.5% 60 614

7/1/08 9/30/08 2.5% 58 612

10/1/08 12/31/08 3.5% 60 614

1/1/09 3/31/09 2.5% 10 564

4/1/09 12/31/10 1.5% 8 562

1/1/11 3/31/11 0.5% – –

4/1/11 9/30/11 1.5% 8 562

10/1/11 3/31/16 0.5% – –

4/1/16 12/31/16 1.5% 56 610

1/1/17 3/31/18 1.5% 8 562

4/1/18 9/30/18 2.5% 10 564

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 taxpayers filing this 

form is approved under OMB control 

number 1545-0074 and is included in 

the estimates shown in the instructions 

for their individual income tax return. 

The estimated burden for all other 

taxpayers who file this form is shown 

below.

Recordkeeping....... 7 hr., 39 min.

Learning about the law

 or the form ......... 1 hr., 33 min.

Preparing, copying,

 assembling, and 

sending

 the form to the IRS ... 2 hr., 56 min.

If you have comments or suggestions 

for making this form simpler, we would 

be happy to hear from you. You can 

send us comments from IRS.gov/

FormComments. Or you can send us 

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your comments to: Internal Revenue 

Service; Tax Forms and Publications 

Division: SE:W:CAR:MP:T;

1111 Constitution Ave.; NW; IR-6526; 

Washington, DC 20224. Do not send 

the tax form to this office. Instead, see 

Filing Instructions, earlier.

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