What Is Schedule D?

Schedule D Explained in Less Than 4 Minutes

Definition
Schedule D of Form 1040 is a tax form used by individuals or corporations to report capital gains and losses to the Internal Revenue Service (IRS).
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Schedule D of Form 1040 is a tax form used by individuals or corporations to report capital gains and losses to the Internal Revenue Service (IRS).

Learn what you need to know to use Schedule D when you file your taxes.

Definition and Examples of Schedule D

The Schedule D of Form 1040 relates to capital gains and losses, and is used to report the following:

  • Sale or exchange of a capital asset that you didn’t report on another form or schedule
  • Gains from involuntary conversions of capital assets that aren’t being held for business or profit, aside from casualty or theft
  • Capital gain distributions you didn’t directly report on Form 1040
  • Effectively connected capital gain distributions you didn’t report directly on Form 1040-NR
  • Nonbusiness bad debts

Crystal Stranger, International Tax Director of GBS Tax and Bookkeeping, spoke with The Balance via email to better explain how Schedule D is used to report capital gains. These gains are typically from stock sales, but they can also be from sales of other investments, such as a property or business.

Schedule D (Form 1040): Capital Gains and Losses

Who Uses Schedule D?

Those who use Schedule D do so because they need to determine the overall gain or loss from transactions reported on Form 8949, report transactions they aren’t required to report on Form 8949, or report a capital gain or loss such as:

  • A gain from Form 2439 or 6252, or Part I of Form 4797
  • A gain or loss from Form 4684, 6781, or 8824
  • A gain or loss from a partnership, S corporation, estate, or trust
  • A capital loss carryover from one tax year to the next

Note

You will also use Schedule D if you need to report capital gain distributions that weren’t reported directly on Form 1040 or 1040-SR, line 7.

Where To Get Schedule D

You can download Schedule D from the IRS website and fill it out, or you can use tax software to prepare this form.

Stranger said to keep in mind that if you file Schedule D, you normally also will need to file Form 8949, as this is the form where the amounts sold during the year are itemized and categorized. That is also where any adjustments are made before carrying over to Schedule D.

“There is a Schedule D form for both individuals and corporations to file, and how capital losses are calculated differs on each form,” Stranger said. Individuals should look for Schedule D (1040), and corporations should look for Schedule D (1120).

What To Do if You Don’t Receive Schedule D

Don’t worry if you don’t receive Schedule D in the mail like you do other tax forms. Instead of Schedule D, you will receive other forms that report the information you need, such as a 1099-B, which shows brokerage transactions, or a 1099-S, which shows proceeds from the sale of real estate.

“These tax forms are the ones most commonly reported on Schedule D,” Stranger said.

Note

There may be other transactions for which you did not receive a tax form, but the information still needs to be reported. For example, if you sold a car or other personal property for a gain, you must still report that amount.

How To Fill Out and Read Schedule D

If you need to file a Schedule D form, Stranger suggests starting with Form 8949 and checking the amounts listed there. Then on Schedule D, check that the amounts are categorized properly as long-term or short-term gains.

In general, any property you own longer than one year is taxed as a long-term gain and has lower tax rates for individuals than property held less than a year. “Losses on property held less than a year can be offset against active income, such as from a job or business,” Stranger said.

However, for losses from long-term property, only $3,000 of the loss can be used to offset active income each year.

“This classification is very important tax-wise,” Stranger said, and it is a common spot to find mistakes.

Can Schedule D Be E-filed?

You can file Schedule D as a part of an individual or corporate tax return package, whether you choose to file by mail or electronically. Schedule D is never filed on its own because the tax amounts must be carried over to a general tax return.

Where To Mail Schedule D

If you choose to send your return through the mail, the location you’ll need to address it to depends on where you live. The IRS will direct you to the right address for your particular situation.

Key Takeaways

  • The Schedule D for your Form 1040 tax form is used to report capital gains and losses to the IRS.
  • Schedule D is often used to report capital gains from the sale of stock.
  • You file Schedule D with your individual or corporate tax return package—it is not submitted on its own.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. "About Schedule D (Form 1040), Capital Gains and Losses." Accessed Feb. 4, 2022.

  2. IRS. "2021 Instructions for Schedule D (2021)." Accessed Feb. 4, 2022.

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