Reporting Capital Gains and Losses
Generally, report capital gains and losses on Form 8949. Complete Form 8949 before you complete line 1b, 2, 3, 8b, 9, or 10
of Schedule D (Form 1040).
Use Form 8949 to report:
The sale or exchange of a capital asset not reported on another form or schedule,
Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit,
Nonbusiness bad debts, and
Worthlessness of a security.
Use Schedule D (Form 1040) to report:
Overall gain or loss from transactions reported on Form 8949;
Certain transactions you do not have to report on Form 8949;
Gain from Form 2439 or 6252 or Part I of Form 4797;
Gain or loss from Form 4684, 6781, or 8824;
Gain or loss from a partnership, S corporation, estate, or trust;
Capital gain distributions not reported directly on your Form 1040; and
Capital loss carryover from the previous year to the current year.
On Form 8949, enter all sales and exchanges of capital assets, including stocks, bonds, etc., and real estate (if not reported
on Form 4684, 4797, 6252, 6781, 8824, or line 1a or 8a of Schedule D (Form 1040)). Include these transactions even if you
did not receive a Form 1099-B or 1099-S for the transaction. Report short-term gains or losses in Part I. Report long-term
gains or losses in Part II. Use as many Forms 8949 as you need.
Exceptions to filing Form 8949 and Schedule D (Form 1040).
There are certain situations where you may not have to file Form 8949 and/or Schedule D (Form 1040).
You do not have to file Form 8949 or Schedule D (Form 1040) if you have no capital losses and your only capital gains
are capital gain distributions from Form(s) 1099-DIV, box 2a. If any Form(s) 1099-DIV you receive have an amount in box 2b
(unrecaptured section 1250 gain), box 2c (section 1202 gain), or box 2d (collectibles (28%) gain), you do not qualify for
If you qualify for this exception, report your capital gain distributions directly on line 13 of Form 1040 (and check
the box on line 13). Also use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions to figure
your tax. You can report your capital gain distributions on line 10 of Form 1040A, instead of on Form 1040, if you do not
have to file Form 1040.
You must file Schedule D (Form 1040), but generally do not have to file Form 8949, if
does not apply and your only capital gains and losses are:
Capital gain distributions;
A capital loss carryover;
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; or
Gains and losses from transactions for which you received a Form 1099-B that shows the basis was reported to the IRS and for
which you do not need to make any adjustments in column (g) of Form 8949 or enter any codes in column (f) of Form 8949.
You cannot use the installment method to report a gain from the sale of stock or securities traded on an established
securities market. You must report the entire gain in the year of sale (the year in which the trade date occurs).
Passive activity gains and losses.
If you have gains or losses from a passive activity, you may also have to report them on Form 8582. In some cases, the loss
may be limited under the passive activity rules. Refer to Form 8582 and its instructions for more information about reporting
capital gains and losses from a passive activity.
Form 1099-B transactions.
If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B
from the broker. Use the Form 1099-B to complete Form 8949 and/or Schedule D (Form 1040).
If you received a Form 1099-B for a transaction, you usually report the transaction on Form 8949. Report the proceeds
shown in box 1d of Form 1099-B in column (d) of either Part I or Part II of Form 8949, whichever applies. Include in column
(g) any selling expenses or option premiums not reflected in Form 1099-B, box 1d or box 1e. If you include a selling expense
in column (g), enter “E
” in column (f). Enter the basis shown in box 1e in column (e). If the basis shown on Form 1099-B is not correct, see How To Complete Form 8949, Columns (f) and (g)
in the Instructions for Form 8949 for the adjustment you must make. If no basis is shown on Form 1099-B, enter the correct
basis of the property in column (e). See the instructions for Form 1099-B, Form 8949, and Schedule D (Form 1040) for more
Form 1099-CAP transactions.
If a corporation in which you own stock has had a change in control or a substantial change in capital structure,
you should receive Form 1099-CAP from the corporation. Use the Form 1099-CAP to fill in Form 8949. If your computations show
that you would have a loss because of the change, do not enter any amounts on Form 8949 or Schedule D (Form 1040). You cannot
claim a loss on Schedule D (Form 1040) as a result of this transaction.
Report the aggregate amount received shown in box 2 of Form 1099-CAP as the sales price in column (d) of either Part
I or Part II of Form 8949, whichever applies.
Form 1099-S transactions.
If you sold or traded land (including air rights), a building or similar structure, a condominium unit, or co-op stock,
you may receive a Form 1099-S, Proceeds From Real Estate Transactions, showing your proceeds and other important information.
See the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040) for how to report these transactions
and include them in Part I or Part II of Form 8949 as appropriate. However, report like-kind exchanges on Form 8824 instead.
See Form 1099-S and the Instructions for Form 1099-S for more information.
If you receive gross proceeds as a nominee (that is, the gross proceeds are in your name but actually belong to someone
else), see the Instructions for Form 8949 for how to report these amounts on Form 8949.
File Form 1099-B or Form 1099-S with the IRS.
If you received gross proceeds as a nominee in 2016, you must file a Form 1099-B or Form 1099-S for those proceeds
with the IRS. Send the Form 1099-B or Form 1099-S with a Form 1096, Annual Summary and Transmittal of U.S. Information Returns,
to your Internal Revenue Service Center by February 28, 2017 (March 31, 2017, if you file Form 1099-B or Form 1099-S electronically).
Give the actual owner of the proceeds Copy B of the Form 1099-B or Form 1099-S by February 15, 2017. On Form 1099-B, you should
be listed as the “Payer.
” The actual owner should be listed as the “Recipient.
” On Form 1099-S, you should be listed as the “Filer.
” The actual owner should be listed as the “Transferor.
” You do not have to file a Form 1099-B or Form 1099-S to show proceeds for your spouse. For more information about the reporting
requirements and the penalties for failure to file (or furnish) certain information returns, see the General Instructions
for Certain Information Returns. If you are filing electronically, see Pub. 1220.
Sale of property bought at various times.
If you sell a block of stock or other property that you bought at various times, report the short-term gain or loss
from the sale on one row in Part I of Form 8949, and the long-term gain or loss on one row in Part II of Form 8949. Write
” in column (b) for the “Date acquired.
On Form 8949, include in column (g) any expense of sale, such as broker's fees, commissions, state and local transfer taxes,
and option premiums, unless you reported the net sales price in column (d). If you include an expense of sale in column (g),
” in column (f).
For information about adjustments to basis, see chapter 13
Short-term gains and losses.
Capital gain or loss on the sale or trade of investment property held 1 year or less is a short-term capital gain
or loss. You report it in Part I of Form 8949.
You combine your share of short-term capital gain or loss from partnerships, S corporations, estates, and trusts,
and any short-term capital loss carryover, with your other short-term capital gains and losses to figure your net short-term
capital gain or loss on line 7 of Schedule D (Form 1040).
Long-term gains and losses.
A capital gain or loss on the sale or trade of investment property held more than 1 year is a long-term capital gain or loss.
You report it in Part II of Form 8949.
You report the following in Part II of Schedule D (Form 1040).
Undistributed long-term capital gains from a mutual fund (or other regulated investment company) or real estate investment
Your share of long-term capital gains or losses from partnerships, S corporations, estates, and trusts.
All capital gain distributions from mutual funds and REITs not reported directly on line 10 of Form 1040A or line 13 of Form
Long-term capital loss carryovers.
The result after combining these items with your other long-term capital gains and losses is your net long-term capital gain
or loss (Schedule D (Form 1040), line 15).
Total net gain or loss.
To figure your total net gain or loss, combine your net short-term capital gain or loss (Schedule D (Form 1040), line
7) with your net long-term capital gain or loss (Schedule D (Form 1040), line 15). Enter the result on Schedule D (Form 1040),
Part III, line 16. If your losses are more than your gains, see
next. If both lines 15 and 16 of your Schedule D (Form 1040) are gains and your taxable income on your Form 1040 is more
than zero, see
Capital Gain Tax Rates
If your capital losses are more than your capital gains, you can claim a capital loss deduction. Report the amount of the
deduction on line 13 of Form 1040, in parentheses.
Limit on deduction.
Your allowable capital loss deduction, figured on Schedule D (Form 1040), is the lesser of:
$3,000 ($1,500 if you are married and file a separate return), or
Your total net loss as shown on line 16 of Schedule D (Form 1040).
You can use your total net loss to reduce your income dollar for dollar, up to the $3,000 limit.
Capital loss carryover.
If you have a total net loss on line 16 of Schedule D (Form 1040) that is more than the yearly limit on capital loss
deductions, you can carry over the unused part to the next year and treat it as if you had incurred it in that next year.
If part of the loss is still unused, you can carry it over to later years until it is completely used up.
When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable
deduction into account, whether or not you claimed it and whether or not you filed a return for the current year.
When you carry over a loss, it remains long term or short term. A long-term capital loss you carry over to the next
tax year will reduce that year's long-term capital gains before it reduces that year's short-term capital gains.
Figuring your carryover.
The amount of your capital loss carryover is the amount of your total net loss that is more than the lesser of:
Your allowable capital loss deduction for the year, or
Your taxable income increased by your allowable capital loss deduction for the year and your deduction for personal exemptions.
If your deductions are more than your gross income for the tax year, use your negative taxable income in figuring
the amount in item (2).
Complete the Capital Loss Carryover Worksheet in the Instructions for Schedule D or Pub. 550 to determine the part of your
capital loss that you can carry over.
Brian and Jackie sold securities in 2016. The sales resulted in a capital loss of $7,000. They had no other capital transactions.
Their taxable income was $26,000. On their joint 2016 return, they can deduct $3,000. The unused part of the loss, $4,000
($7,000 − $3,000), can be carried over to 2017.
If their capital loss had been $2,000, their capital loss deduction would have been $2,000. They would have no carryover.
Use short-term losses first.
When you figure your capital loss carryover, use your short-term capital losses first, even if you incurred them after
a long-term capital loss. If you have not reached the limit on the capital loss deduction after using the short-term capital
losses, use the long-term capital losses until you reach the limit.
Decedent's capital loss.
A capital loss sustained by a decedent during his or her last tax year (or carried over to that year from an earlier year)
can be deducted only on the final income tax return filed for the decedent. The capital loss limits discussed earlier still
apply in this situation. The decedent's estate cannot deduct any of the loss or carry it over to following years.
Joint and separate returns.
If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital
loss carryovers. However, if you and your spouse once filed a joint return and are now filing separate returns, any capital
loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss.
The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. These lower
rates are called the maximum capital gain rates.
The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss.
For 2016, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%. See Table 16-1 for details.
If you figure your tax using the maximum capital gain rate and the regular tax computation results in a lower tax, the regular
tax computation applies.
All of your net capital gain is from selling collectibles, so the capital gain rate would be 28%. If you are otherwise subject
to a rate lower than 28%, the 28% rate does not apply.
Investment interest deducted.
If you claim a deduction for investment interest, you may have to reduce the amount of your net capital gain that
is eligible for the capital gain tax rates. Reduce it by the amount of the net capital gain you choose to include in investment
income when figuring the limit on your investment interest deduction. This is done on the Schedule D Tax Worksheet or the
Qualified Dividends and Capital Gain Tax Worksheet. For more information about the limit on investment interest, see Interest Expenses
in chapter 3 of Pub. 550.
Table 16-1. What Is Your Maximum Capital Gain Rate?
|IF your net capital gain is from ...
gain rate is ...
|eligible gain on qualified small business stock minus the section 1202 exclusion
|unrecaptured section 1250 gain
|other gain1 and the regular tax rate that would apply is 39.6%
|other gain1 and the regular tax rate that would apply is 25%, 28%, 33%, or 35%
|other gain1 and the regular tax rate that would apply is 10% or 15%
|1“Other gain” means any gain that is not collectibles gain, gain on small business stock, or
unrecaptured section 1250 gain.
|Collectibles gain or loss.
This is gain or loss from the sale or trade of a work of art, rug, antique, metal (such as gold, silver, and platinum
bullion), gem, stamp, coin, or alcoholic beverage held more than 1 year.
Collectibles gain includes gain from sale of an interest in a partnership, S corporation, or trust due to unrealized
appreciation of collectibles.
Gain on qualified small business stock.
If you realized a gain from qualified small business stock that you held more than 5 years, you generally can exclude some
or all of your gain under section 1202. The eligible gain minus your section 1202 exclusion is a 28% rate gain. See Gains on Qualified Small Business Stock
in chapter 4 of Pub. 550.
Unrecaptured section 1250 gain.
Generally, this is any part of your capital gain from selling section 1250 property (real property) that is due to depreciation
(but not more than your net section 1231 gain), reduced by any net loss in the 28% group. Use the Unrecaptured Section 1250
Gain Worksheet in the Schedule D (Form 1040) instructions to figure your unrecaptured section 1250 gain. For more information
about section 1250 property and section 1231 gain, see chapter 3 of Pub. 544.
Tax computation using maximum capital gain rates.
Use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet (whichever applies) to
figure your tax if you have qualified dividends or net capital gain. You have net capital gain if Schedule D (Form 1040),
lines 15 and 16, are both gains.
Schedule D Tax Worksheet.
Use the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions to figure your tax if:
You have to file Schedule D (Form 1040); and
Schedule D (Form 1040), line 18 (28% rate gain) or line 19 (unrecaptured section 1250 gain), is more than zero.
Qualified Dividends and Capital Gain Tax Worksheet.
If you do not have to use the Schedule D Tax Worksheet (as explained above) and any of the following apply, use the
Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040 or Form 1040A (whichever you file) to
figure your tax.
Alternative minimum tax.
These capital gain rates are also used in figuring alternative minimum tax.