IRS Form 1040 (Schedule D) – IRS Form, Instructions, Pubs 2026

IRS Form 1040 (Schedule D) – If you’ve sold stocks, bonds, cryptocurrency, real estate, or other investments during the year, you may need to report those transactions on your tax return. IRS Form 1040 Schedule D, also known as Capital Gains and Losses, is the key form for calculating and reporting these gains or losses. This guide will walk you through everything you need to know about Schedule D, including who must file it, how to complete it, and the latest tax rates for 2025. Whether you’re a first-time filer or looking to optimize your tax strategy, understanding Schedule D can help you avoid costly mistakes and potentially reduce your tax bill.

For the official form, you can download the PDF directly from the IRS website: https://www.irs.gov/pub/irs-pdf/f1040sd.pdf.

What Are Capital Gains and Losses?

A capital gain occurs when you sell an asset for more than its adjusted basis (typically your purchase price plus any improvements or adjustments). Conversely, a capital loss happens when you sell for less than the basis. Capital assets include most personal or investment property, such as stocks, bonds, homes, cars, collectibles, and even digital assets like cryptocurrencies and NFTs.

Gains and losses are classified as short-term or long-term based on how long you held the asset:

  • Short-term: Held for one year or less. Taxed at ordinary income rates.
  • Long-term: Held for more than one year. Eligible for lower capital gains tax rates.

Exceptions apply for certain assets, like inherited property or qualified small business stock. Losses from personal-use items (e.g., your primary car or home furnishings) aren’t deductible, but investment losses can offset gains.

Who Needs to File IRS Schedule D?

You must file Schedule D if you have:

  • Capital gains or losses from the sale or exchange of capital assets.
  • Capital gain distributions from mutual funds or REITs (reported on Form 1099-DIV, box 2a).
  • Gains or losses from partnerships, S corporations, estates, or trusts (from Schedule K-1).
  • Carryover losses from prior years.
  • Certain transactions like involuntary conversions or like-kind exchanges.

Even if you don’t need to file Form 8949 (for detailed transaction reporting), you might still need Schedule D to summarize totals or report distributions. If you disposed of an investment in a qualified opportunity fund (QOF), you’ll need to attach Form 8949 and check the appropriate box on Schedule D.

Note: If your only capital gains are from mutual fund distributions reported directly on Form 1040 line 7a, you may not need Schedule D. Always consult the IRS instructions or a tax professional to confirm.

Step-by-Step Guide: How to Fill Out Schedule D?

Schedule D has three parts: Part I for short-term transactions, Part II for long-term, and Part III for the summary. Round all amounts to whole dollars and complete Form 8949 first if you have individual transactions to report. Here’s a breakdown:

Part I: Short-Term Capital Gains and Losses (Assets Held 1 Year or Less)

  • Line 1a: Enter totals from Form 1099-B or 1099-DA where basis was reported to the IRS and no adjustments are needed.
  • Line 1b: Totals from Form 8949 with Box A or G checked (short-term, basis reported to IRS).
  • Line 2: Totals from Form 8949 with Box B or H checked (short-term, basis not reported to IRS).
  • Line 3: Totals from Form 8949 with Box C or I checked (short-term, not reported on 1099-B).
  • Line 4: Short-term gains/losses from Forms 6252, 4684, 6781, or 8824.
  • Line 5: Net short-term gains/losses from K-1s.
  • Line 6: Short-term capital loss carryover (from Capital Loss Carryover Worksheet).
  • Line 7: Net short-term gain or loss (combine lines 1a–6).

Part II: Long-Term Capital Gains and Losses (Assets Held More Than 1 Year)

  • Line 8a: Similar to 1a, but for long-term.
  • Line 8b: From Form 8949 with Box D or J checked.
  • Line 9: From Form 8949 with Box E or K checked.
  • Line 10: From Form 8949 with Box F or L checked.
  • Line 11: Long-term gains from Forms 4797, 2439, 6252, etc.
  • Line 12: Net long-term from K-1s.
  • Line 13: Capital gain distributions.
  • Line 14: Long-term capital loss carryover.
  • Line 15: Net long-term gain or loss (combine lines 8a–14).

Part III: Summary

  • Line 16: Combine lines 7 and 15.
  • If a gain, enter on Form 1040 line 7a and proceed.
  • If a loss, skip to line 21.
  • Line 17–20: Check for special worksheets (e.g., 28% Rate Gain or Unrecaptured Section 1250 Gain) if applicable.
  • Line 21: Deductible loss (up to $3,000 or $1,500 if married filing separately).
  • Line 22: Qualified dividends check; use appropriate tax worksheet.

For digital assets, use new codes (G–L) on applicable lines. If you have home sale gains, you may exclude up to $250,000 ($500,000 joint) if eligibility tests are met.

Capital Gains Tax Rates for 2025

Long-term capital gains are taxed at preferential rates based on your taxable income:

  • 0%: If income is up to $48,350 (single), $96,700 (joint), $64,750 (head of household).
  • 15%: For income above the 0% threshold up to $533,400 (single), $600,050 (joint), etc.
  • 20%: For income exceeding the 15% threshold.

Higher rates apply to specific gains: 28% for collectibles or qualified small business stock, 25% for unrecaptured section 1250 gain. Short-term gains are taxed at ordinary rates (up to 37%). Use the Qualified Dividends and Capital Gain Tax Worksheet or Schedule D Tax Worksheet to calculate your tax.

Handling Capital Losses: Deductions and Carryovers

If losses exceed gains, deduct up to $3,000 ($1,500 married filing separately) against ordinary income. Excess losses carry forward indefinitely using the Capital Loss Carryover Worksheet. This can be a valuable tax planning tool—consider “tax-loss harvesting” to offset gains.

  • Form 8949: Details individual sales; required for most transactions.
  • Form 4797: For business property sales.
  • Form 8997: For QOF investments.
  • Publications: Pub. 550 (Investment Income), Pub. 544 (Sales of Assets).

For more, visit IRS.gov/ScheduleD or consult tax software like TurboTax or H&R Block for guided filing.

Tips for Filing Schedule D Successfully

  • Gather all 1099 forms (e.g., 1099-B, 1099-DIV) early.
  • Track your basis accurately—adjust for dividends, splits, or fees.
  • Watch for wash sales: Losses are disallowed if you repurchase similar securities within 30 days.
  • Consider professional help if you have complex transactions like options or straddles.
  • E-file for faster processing; many platforms support direct import of brokerage data.

By staying organized, you can minimize errors and maximize deductions.

Final Thoughts on IRS Schedule D

Filing Schedule D might seem complex, but it’s essential for accurately reporting investment activity and potentially lowering your tax liability through offsets and preferential rates. For tax year 2025 filings in 2026, ensure you’re using the latest forms and instructions from IRS.gov. If your situation involves large gains, international assets, or business property, seek advice from a tax advisor to comply fully and optimize your return. Remember, proper reporting helps avoid audits and penalties—start early and double-check your calculations!