What Is Schedule D: Capital Gains and Losses?

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What Is Schedule D?

Schedule D is one of many schedules provided by the IRS and filed with the U.S. Individual Income Tax Return Form 1040. Schedule D is required when reporting any gains or losses realized from the sale of capital assets.

Capital assets include property owned for personal purposes or investment. The capital assets commonly reported on Schedule D include stocks, bonds, and homes.

Key Takeaways

• Schedule D is an IRS form to help taxpayers compute their capital gains or losses and the taxes due.
• The calculations from Schedule D are combined with individual tax return Form 1040, which will affect the adjusted gross income amount.
• Capital losses that exceed the current year's gains may be carried forward using Schedule D.

Capital Gains and Losses

Investments or assets that are sold must be recorded for tax purposes. Capital gains or losses are categorized as short-term, held less than 12 months from the purchase date, or long-term held 12 months or more from the purchase date.

Long-term capital gains tax is often more favorable depending on one's income tax bracket than short-term gains taxed according to ordinary income tax brackets.

Who Files Schedule D?

As taxpayers collect information about the current year's capital asset sales and prior year capital loss carry-forwards, those with reportable information use Schedule D. The instructions for completing Schedule D advise tax filers to prepare and bring over information from the following tax forms:

• Form 8949 for taxpayers who sell investments or their home
• Form 4797 for taxpayers who sell a business property
• Form 6252 for taxpayers who have installment sale income
• Form 4684 for taxpayers who have a casualty or theft loss
• Form 8824 for taxpayers who made a like-kind exchange

Ultimately, the capital gain or loss on Schedule D is combined with other income and loss to compute the total tax on Form 1040. Schedule D and Form 8949 are submitted with Form 1040 when taxpayers file their federal tax returns.

How to Complete Schedule D

The complete Schedule D form can be found on the IRS website. Taxpayers can complete Schedule D following the instructions online or may opt to use a personal accountant or eFile tax service provided by a third-party company.

All pages of Schedule D are available on the IRS website.

Schedule D Example

An individual sold shares of a stock and received a Form 1099-B from their broker or financial institution that reports a $4 net short-term capital gain and a net $8 long-term capital gain from the following sales:

• The stock was acquired on 1/1/23 for $4 and sold on 4/27/23 for $6, resulting in a short-term capital gain of $2.
• The stock was acquired on 1/1/23 for $3 and sold on 4/28/23 for $7, resulting in a short-term capital gain of $4.
• The stock was acquired on 1/1/23 for $9 and sold on 4/29/23 for $8, resulting in a short-term capital loss of $1.
• The stock was acquired on 1/1/23 for $9 and sold on 4/30/23 for $8, resulting in a short-term capital loss of $1.
• The stock was acquired on 1/1/17 for $1 and sold on 12/31/23 for $9, resulting in a long-term capital gain of $8.
• The stock was acquired on 1/2/17 for $1 and sold on 12/30/23 for $3, resulting in a long-term capital gain of $2.
• The stock was acquired on 1/3/17 for $4 and sold on 4/29/23 for $3, resulting in a long-term capital loss of $1.
• The stock was acquired on 1/4/17 for $4 and sold on 4/30/23 for $3, resulting in a long-term capital loss of $1.

Form 1099-B provides taxpayers with information about securities or property involved in a transaction handled by a broker, such as the description of the item sold, the purchase date, and the sale date.

These stock sales are sales of capital assets that must be reported on Schedule D. Schedule D instructs individuals to first complete Form 8949. Sales of stock that was owned for less than a year are sales of short-term capital assets reported on Part I of Form 8949, and sales of stock held for more than a year are sales of long-term capital assets reported on Part II of Form 8949.

A tally of gains and losses gives a total Part I, net short-term capital gain of $4 to transfer to Part I of Schedule D. The total Part II, net long-term capital gain of $8 will transfer to Part II of Schedule D. Schedule D, Part III uses this information to compute the net allowable capital gain or loss, which is a $12 total capital gain.

When Is Schedule D Required?

Schedule D is required when a taxpayer reports capital gains or losses from investments or as the result of a business venture or partnership.

How Is Schedule D Income Taxed?

Short-term capital gains are taxed by a taxpayer's ordinary income at graduated tax rates. Long-term gains are taxed according to the IRS capital gains rate. For the tax year 2023, a capital gains rate of 15% applies if taxable income is more than $44,625 but less than or equal to $492,300 for a single filer or more than $89,250 up to $553,850 for those married filing joint returns. For tax year 2024, the 15% applies to single filers with incomes greater than $47,025 but less than or equal to $518,900. For married couples, 15% applies to incomes between $94,050 and $583,750.

Is Cryptocurrency Reported on Schedule D?

The IRS treats cryptocurrency as property. Those who buy, sell, or exchange cryptocurrency, will report activity using Form 1040 Schedule D to reconcile capital gains and losses.

The Bottom Line

Schedule D is a tax form filed with IRS Form 1040 that reports the gains or losses realized from the sale of capital assets. Capital assets may include personal property such as a home, collectibles, or stocks and bonds. All gains earned or losses will be considered short-term or long-term depending on how long the asset was held. The instructions and Form Schedule D are found on the IRS website.

1. Internal Revenue Service. "Instructions for Schedule D, Capital Gains and Losses." Pages 1-2.
2. Internal Revenue Service. "Topic No. 409, Capital Gains and Losses."
3. Internal Revenue Service. "Instructions for Schedule D, Capital Gains and Losses." Page 1.
4. Internal Revenue Service. "Instructions for Form 8949, Sales and Other Dispositions of Capital Assets." Page 1.
5. Internal Revenue Service. "About Form 1099-B, Proceeds from Broker and Barter Exchange Transactions."
6. Internal Revenue Service. "Form 1099-B, Proceeds from Broker and Barter Exchange Transactions."
7. Internal Revenue Service. "Form 8949, Sales and other Dispositions of Capital Assets."
8. Internal Revenue Service. "Schedule D (Form 1040), Capital Gains and Losses."
9. Internal Revenue Service. "26 CFR 601.602: Tax Forms and Instructions; Rev. Proc. 2023-34." Pages 7-8.
10. Internal Revenue Service. "Digital Assets."

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