IRS Schedule D (Capital Gain & Loss) is used to report capital gains and capital losses from the sale or exchange of capital assets. Capital assets include stocks, bonds, real estate, and other investment property.

Individual taxpayers complete Schedule D and include it with their annual Form 1040 (US Individual Income Tax Return).

Who Must File Schedule D?

A taxpayer should include Schedule D with their tax return if they had one or more of the following:

  • Sold or exchanged a capital asset.
  • Received a capital gain distribution not reported directly on page 1 of Form 1040.
  • Received an allocation of capital gains or losses from a partnership, S corporation, estate, or trust.
  • Had capital loss carryovers from the prior tax year
  • Recognized gains or losses from the sale of business assets reported on Form 4797 (Sale of Business Property)
  • Traded Section 1256 contracts reported on Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles)

Relevant Parts of Schedule D on Form 1040

Part I – Short-Term Capital Gains and Losses:

The taxpayer separates its capital asset transactions into short-term and long-term transactions. Short-term transactions generally have a holding period of one year or less.

The taxpayer separately reports the gross proceeds, cost basis, any adjustments, and the net gain or loss. The taxpayer first completes Form 8949 (Sale and Dispositions of Capital Assets), and the totals from Form 8949 flow to Schedule D.  

The taxpayer includes a separate Form 8949 for each of the following:

  • Transactions where the gross proceeds and costs basis information was reported to the IRS on a Form 1099
  • Transactions where the gross proceeds were reported to the IRS, but the costs basis information was NOT reported
  • Transactions that were not reported on a Form 1099

Part II – Long-Term Capital Gains and Losses:

The taxpayer separates its capital asset transactions into short-term and long-term transactions. Long-term transactions generally have a holding period of greater than one year.

The taxpayer separately reports the gross proceeds, cost basis, any adjustments, and the net gain or loss. The taxpayer first completes Form 8949 (Sale and Dispositions of Capital Assets), and the totals from Form 8949 flow to Schedule D.  

The taxpayer includes a separate Form 8949 for each of the following:

  • Transactions where the gross proceeds and costs basis information was reported to the IRS on a Form 1099
  • Transactions where only the gross proceeds were reported to the IRS, and the cost basis information was NOT reported
  • Transactions that were not reported on a Form 1099

Part III – Summary:

The summary page serves several purposes. First, it totals the short-term and long-term gains and losses reported on page 1 of Schedule D.

Second, the page reconciles the tax calculations from other worksheets within Form 1040. For example, if the taxpayer has long-term capital gains or qualified dividend income, they should complete the Qualified Dividends and Capital Gains Tax Worksheet (QDCGTW). If the taxpayer has unrecaptured Section 1250 gains related to the sale of depreciable real property, they may also need to complete that worksheet.

Schedule D Tutorial Videos

For some video tutorials on Schedule D issues:

Additional Information

Taxpayers looking for more information can visit the Schedule D instructions on the IRS website.