IRS Form 8949 Instructions: Boxes, Cost Basis, and Schedule D

Form 8949 is where you list each capital asset you sold during the year — every stock, bond, mutual fund share, piece of real estate, and digital asset — along with the dates, proceeds, cost basis, and any adjustments, then carry the totals to Schedule D. The IRS Form 8949 instructions organize the work into two parts (short-term and long-term) and twelve reporting categories keyed to what your broker sent you. Your broker files the same numbers with the IRS, so the entries need to match your records and reconcile cleanly on Schedule D.¹

When You Can Skip the Form Entirely

Not every capital gain transaction needs to be listed on Form 8949. Under Exception 1, you can report a transaction directly on Schedule D (line 1a for short-term, line 8a for long-term) if all of these are true: your broker reported it on Form 1099-B or Form 1099-DA with basis sent to the IRS, the “Ordinary” box is not checked, no wash sale or other adjustment applies, and your records match the broker’s numbers. Miss any one condition and that transaction belongs on Form 8949.²

If you have a lot of transactions to report, a second shortcut lets you attach a spreadsheet-style statement rather than transcribe each line. Enter the combined totals on a single Form 8949 row, put your broker’s name and “see attached statement” in the description column, enter code M in the adjustment column, and attach the detail.³

Part I vs. Part II: Sorting by Holding Period

Every transaction goes into Part I or Part II based on how long you held the asset. Part I is for assets held one year or less. Part II is for assets held more than one year. That single distinction changes the tax rate, so the acquisition and sale dates matter.⁴

For each row, you fill in:

Column (a), a description of the property. For stock, name the company and number of shares; for a digital asset, name the token and the exact units sold.
Column (b), the date you acquired it.
Column (c), the date you sold or disposed of it.
Column (d), the sales proceeds.
Column (e), your cost or other basis, including commissions and fees.
Columns (f) and (g), any adjustment code and dollar amount.
Column (h), the gain or loss, calculated by combining (d), (e), and (g).

Choosing the Right Box: A Through L

At the top of each Part, check the box that matches the documentation you received. Your 1099-B or 1099-DA tells you which one applies. Transactions from different boxes go on separate copies of Form 8949, so if you have Box A trades and Box B trades, that’s two Part I sheets.⁴

Traditional assets in Part I:

Box A: reported on Form 1099-B with basis sent to the IRS.
Box B: reported on Form 1099-B without basis sent to the IRS.
Box C: not reported on Form 1099-B or Form 1099-DA at all. Don’t use this box for digital assets.

Traditional assets in Part II:

Box D: reported on Form 1099-B with basis sent to the IRS.
Box E: reported on Form 1099-B without basis sent to the IRS.
Box F: not reported on Form 1099-B or Form 1099-DA at all. Don’t use this box for digital assets.

Digital assets have their own set of boxes starting with the 2025 tax year. Part I (short-term): Box G with basis reported, Box H without basis reported, Box I when you received no 1099-B or 1099-DA. Part II (long-term): Box J, Box K, and Box L follow the same pattern.³ If you traded crypto on a platform that didn’t send you a tax form, the sale still gets reported — use Box I or Box L and supply the description, dates, proceeds, and basis yourself.

Getting Cost Basis Right

For most assets you bought, basis is what you paid plus commissions and fees. Three situations change that answer and account for a large share of Form 8949 mistakes.

Inherited Property

Basis in inherited property is generally the fair market value on the date of the decedent’s death, not what they paid — the “stepped-up basis.” If the estate’s personal representative elected the alternate valuation date six months after death, that value applies instead. Exception: if you gave appreciated property to someone who died within a year, you get back their adjusted basis, not the stepped-up value.⁵

Gifted Property

Property received as a gift usually takes the donor’s basis, provided the fair market value at the time of the gift equaled or exceeded what the donor paid. If the donor paid gift tax, increase your basis by the portion of that tax attributable to the appreciation.⁶

When the fair market value at the time of the gift was less than the donor’s basis, a dual-basis rule applies: use the donor’s basis to calculate a gain, and the lower fair market value to calculate a loss. If neither method produces a gain or a loss, the result is zero. The basis you report depends on whether the sale was profitable, which trips people up.

Digital Assets

Basis in cryptocurrency or other digital assets is the acquisition cost, including transaction fees. If you received crypto as payment for services, basis is the fair market value at the time you received it (the amount you already reported as income). You may use specific identification to choose which units you’re selling if you can document the lot; otherwise the IRS applies first-in, first-out.⁷

Adjustment Codes You’ll Actually Use

Column (f) takes a letter code, and column (g) takes the dollar adjustment. If more than one code applies to a single transaction, list them alphabetically in (f) and enter the net adjustment in (g).²

Code B fixes an incorrect basis on your 1099-B. When the broker’s basis is too low, enter a negative number in column (g) to reduce your gain. When it’s too high, enter a positive number.

Code W handles wash sales. A wash sale happens when you sell a security at a loss and buy a substantially identical one within 30 days before or after the sale. The IRS disallows the loss for the year. Enter W in column (f) and the disallowed loss as a positive number in column (g), which reduces your reported loss or increases your reported gain. The disallowed loss isn’t lost permanently: it’s added to the basis of the replacement security. If you sold stock for a $250 loss and repurchased it within 30 days for $800, your basis in the new shares is $1,050.⁸

Code H covers the home sale exclusion. If you sold your main home and qualify to exclude gain under Section 121 (up to $250,000 single, $500,000 married filing jointly), enter H and the excluded amount as a negative number in column (g). You only need to list the sale on Form 8949 if you received a Form 1099-S or can’t exclude the entire gain.

Code L zeroes out a nondeductible loss on personal-use property, like a car or furniture. If the broker reported proceeds from such a sale, enter L and the amount needed to erase the loss as a positive number in column (g).

Worthless Securities

If a security became completely worthless during the year, treat it as though you sold it on the last day of the year for zero proceeds. The deemed sale date of December 31 determines whether the loss is short-term or long-term, based on when you originally acquired the security.⁹ Enter December 31 in column (c), zero in column (d), and your basis in column (e).

Carrying Totals to Schedule D

Total each column at the bottom of each Part. Short-term totals from Part I flow to Schedule D lines 1b, 2, or 3, depending on which box you checked. Long-term totals from Part II flow to lines 8b, 9, or 10.² Schedule D nets your short-term and long-term results, applies the right tax rates, and produces the number that lands on Form 1040.¹⁰

When Losses Exceed Gains

If your capital losses are larger than your gains, you can deduct up to $3,000 of the excess against other income ($1,500 if married filing separately).¹¹ Anything unused carries forward indefinitely and keeps its short-term or long-term character.¹² Report every transaction on Form 8949 even when you know the losses will exceed the annual cap; the IRS uses the full picture to verify the carryforward, and Schedule D includes a worksheet for tracking it.¹⁰

Deadline and Penalties

Form 8949 goes in with your Form 1040 and follows the same deadline: April 15, 2027, for the 2026 tax year. Form 4868 gives you an automatic six-month extension to file, but not to pay.¹³

Late filing runs 5% of the unpaid tax per month, up to 25%. If the return is more than 60 days late, the minimum penalty is $525 or 100% of the unpaid tax, whichever is less.¹⁴ Substantially understating your capital gains carries a separate 20% accuracy-related penalty on the underpayment. “Substantial” means the greater of 10% of the tax that should have been shown or $5,000.¹⁵

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Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets
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Internal Revenue Service. Instructions for Form 8949 – Sales and Other Dispositions of Capital Assets
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Internal Revenue Service. Instructions for Form 8949 – Sales and Other Dispositions of Capital Assets
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Internal Revenue Service. Form 8949 (2025) – Sales and Other Dispositions of Capital Assets
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Internal Revenue Service. Basis of Assets
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Internal Revenue Service. Property (Basis, Sale of Home, Etc.)
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Internal Revenue Service. Frequently Asked Questions on Virtual Currency Transactions
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Internal Revenue Service. Income – Capital Gain or Loss Workout
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Internal Revenue Service. Losses (Homes, Stocks, Other Property)
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Internal Revenue Service. 2025 Instructions for Schedule D (Form 1040) – Capital Gains and Losses
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Office of the Law Revision Counsel. 26 US Code 1211 – Limitation on Capital Losses
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Office of the Law Revision Counsel. 26 USC 1212 – Capital Loss Carrybacks and Carryovers
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Internal Revenue Service. Publication 509 (2026), Tax Calendars
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Internal Revenue Service. Failure to File Penalty
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Office of the Law Revision Counsel. 26 US Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments