How to Fill Out Schedule D (Form 1040): Form 8949, Adjustments, and Losses

To fill out Schedule D of Form 1040, list each capital asset sale on Form 8949 first, then carry the column totals to Schedule D, where three parts net your short-term and long-term results into a single gain or loss that flows to line 7 of your 1040. Most filers work the form in that order: gather records, complete 8949, then Schedule D Parts I, II, and III.

What You Need Before You Start

For every sale you’ll report, you need four things: a description of the asset, the date you acquired it, the date you sold it, and the dollar figures (proceeds and cost basis, with basis generally being what you paid adjusted for commissions and fees). Brokerages report most of this on Form 1099-B, which arrives by mid-February.1Internal Revenue Service. About Form 1099-B, Proceeds From Broker and Barter Exchange Transactions

Check one detail on the 1099-B before anything else: whether the broker reported your cost basis to the IRS. That single fact decides which box you check on Form 8949 and, in some cases, whether you need Form 8949 at all.2Internal Revenue Service. Instructions for Schedule D (Form 1040)

You’ll also need a Schedule K-1 for any partnership, S corporation, estate, or trust interest that passed capital gains through to you,3Internal Revenue Service. Partner’s Instructions for Schedule K-1 (Form 1065) Form 1099-DIV for capital gain distributions from mutual funds and REITs,4Internal Revenue Service. Mutual Funds (Costs, Distributions, Etc.) and last year’s Capital Loss Carryover Worksheet if you’re bringing forward unused losses.

Step 1: Complete Form 8949

Form 8949 is where individual transactions get listed before they’re summarized on Schedule D. It has two identical sections. Part I is for short-term sales (held one year or less). Part II is for long-term sales (held more than one year).5Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets

At the top of each section, check one of three boxes:

  • Box A (short-term) or Box D (long-term): basis was reported to the IRS on your 1099-B.
  • Box B (short-term) or Box E (long-term): the sale appeared on a 1099-B, but basis was not reported to the IRS.
  • Box C (short-term) or Box F (long-term): no 1099-B was issued.

Use a separate Form 8949 page for each box category. Then fill in columns (a) through (h) for every transaction: description, date acquired, date sold, proceeds, cost basis, adjustment code (if any), adjustment amount, and the resulting gain or loss. Add the columns at the bottom of each page. Those totals go on Schedule D.6Internal Revenue Service. Form 8949 – Sales and Other Dispositions of Capital Assets

When You Can Skip Form 8949

If your broker reported basis to the IRS and no adjustments are needed for those sales, you can bypass Form 8949 and enter the aggregate totals directly on Schedule D line 1a (short-term) or line 8a (long-term).2Internal Revenue Service. Instructions for Schedule D (Form 1040) Any transaction that needs an adjustment (a wash sale, a basis correction, an inherited-property step-up) has to go on Form 8949 the long way.

Step 2: Schedule D Part I — Short-Term

Put your name and Social Security number at the top so they match your 1040. Then work Part I:

  • Line 1a: aggregate short-term totals for basis-reported sales that need no adjustments (the shortcut above).
  • Line 1b: totals from Form 8949 Part I with Box A checked.
  • Line 2: totals from Form 8949 Part I with Box B checked.
  • Line 3: totals from Form 8949 Part I with Box C checked.
  • Line 4: short-term gain or loss from other forms, such as installment sales on Form 6252.
  • Line 5: short-term amounts flowing from Schedule K-1s.
  • Line 6: short-term capital loss carryover from last year’s worksheet, entered as a negative number.
  • Line 7: net short-term result.

Step 3: Schedule D Part II — Long-Term

Part II mirrors Part I but pulls from the long-term side of Form 8949 and adds a few lines unique to long-term gains:

  • Line 8a: aggregate long-term totals for basis-reported sales with no adjustments.
  • Lines 8b, 9, 10: totals from Form 8949 Part II with Box D, E, or F checked, respectively.
  • Line 11: gains from Form 2439 (undistributed capital gains from a mutual fund or REIT), plus long-term gains from certain other forms.
  • Line 12: long-term amounts from Schedule K-1s.
  • Line 13: capital gain distributions reported on your 1099-DIV.
  • Line 14: long-term capital loss carryover from last year’s worksheet, entered as a negative number.
  • Line 15: net long-term result.

Step 4: Schedule D Part III — Summary

Line 16 combines line 7 (short-term) and line 15 (long-term) into your overall net capital gain or loss. Lines 17 through 21 are yes/no questions that route you to the correct tax worksheet.

If you have a net gain and answer “Yes” on line 17 (you have 28% rate gain from collectibles or unrecaptured Section 1250 gain from previously depreciated real estate), use the Schedule D Tax Worksheet in the instructions. Otherwise, use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions. Either worksheet applies the preferential long-term rates (0%, 15%, or 20%) to eligible gains while your short-term gains stay taxed at ordinary rates.7Internal Revenue Service. Topic No. 409, Capital Gains and Losses

The final number from line 16 transfers to line 7 of Form 1040.

Adjustments That Change What You Enter

Home Sale Exclusion

If you sold your primary residence and owned and lived in it for at least two of the five years before the sale, you can exclude up to $250,000 of gain ($500,000 if married filing jointly).8Office of the Law Revision Counsel. 26 U.S.C. 121 – Exclusion of Gain From Sale of Principal Residence If your gain is fully within the exclusion, don’t report the sale on Schedule D at all. Anything above the exclusion goes on the form like any other long-term gain.

Inherited Property

For assets you inherited, your basis is generally the fair market value on the date of the prior owner’s death, not what they paid. This “stepped-up basis” usually shrinks the taxable gain. Inherited assets are automatically treated as long-term regardless of how long anyone actually held them. Retirement accounts like IRAs and 401(k)s don’t receive the step-up.

Wash Sales

You can’t claim a loss if you bought the same or a substantially identical security within 30 days before or after the sale date.9Office of the Law Revision Counsel. 26 U.S.C. 1091 – Loss From Wash Sales of Stock or Securities The disallowed loss doesn’t vanish; it adds to the basis of the replacement shares. On Form 8949, enter code “W” in the adjustment column and enter the disallowed loss as a positive number in column (g). Brokers usually flag wash sales on your 1099-B, but if you trade across multiple accounts, you’re responsible for tracking them. The rule covers stocks, bonds, options, and contracts to acquire securities. It does not currently apply to cryptocurrency.

Collectibles and Depreciated Real Estate

Long-term gain from collectibles (coins, art, antiques, precious metals, stamps) is taxed at a maximum 28%. Gain attributable to depreciation on rental or business real estate (“unrecaptured Section 1250 gain”) is taxed at a maximum 25%.7Internal Revenue Service. Topic No. 409, Capital Gains and Losses Either one makes line 17 a “Yes” and sends you to the Schedule D Tax Worksheet.

Digital Assets

Selling cryptocurrency, NFTs, or other digital assets for cash, property, or another digital asset is a taxable event and gets reported the same way as a stock sale: on Form 8949, then Schedule D.10Internal Revenue Service. Understanding Digital Asset Reporting and Tax Requirements

If Your Net Result Is a Loss

When capital losses exceed capital gains, you can deduct up to $3,000 of the excess against ordinary income each year ($1,500 if married filing separately).11Office of the Law Revision Counsel. 26 U.S.C. 1211 – Limitation on Capital Losses Anything above that carries forward to next year and keeps its short-term or long-term character.12Office of the Law Revision Counsel. 26 U.S.C. 1212 – Capital Loss Carrybacks and Carryovers There’s no cap on how many years the carryover can continue.

Use the Capital Loss Carryover Worksheet in the Schedule D instructions to calculate what rolls forward. The worksheet splits short-term from long-term. Those figures go on lines 6 and 14 of next year’s Schedule D.

Filing and Records

Tax software attaches Schedule D and Form 8949 automatically when you e-file. On a paper return, place Schedule D behind Form 1040 in numerical order with the Form 8949 pages attached.

Keep your completed Schedule D, every Form 8949, and each 1099-B and 1099-DIV for at least three years from the date you filed.13Internal Revenue Service. How Long Should I Keep Records If you’re carrying a loss forward, keep the records that support the original loss until three years after you file the return that finally uses it up.