What is 'Schedule D'

Schedule D is one of the many schedules attached to U.S. Individual Income Tax Return Form 1040 that you must complete to report any gains or losses you realize from the sale of your capital assets. Your capital assets are, pretty much, everything you own and use for pleasure or investment purposes. The capital assets you are most likely to report on Schedule D are the stocks, bonds, and homes you sell.

BREAKING DOWN 'Schedule D'

Schedule D has instructions that help you collect information about the current year capital asset sales and prior year capital loss carryforwards. Depending on your tax situation, Schedule D may instruct you to prepare and bring over information from nine or more other tax forms. These forms could include: 

  • Form 8949 if you sell investments or your home
  • Form 4797 if you sell a business property
  • Form 6252 if you have installment sale income
  • Form 4648 if you have a casualty or theft loss
  • Form 8824 if you made a like-kind exchange

Taking a simple example, assume the only property you sold during the tax year was stock and you received a Form 1099-B from your broker that reports a $4 net short-term capital gain and a net $8 long-term capital gain from the following sales:  

Stock acquired on 1/1/17 for $4 and sold on 4/27/17 for $6, resulting in a short-term capital gain of $2.

Stock acquired on 1/1/17 for $3 and sold on 4/28/17 for $7, resulting in a short-term capital gain of $4.

Stock acquired on 1/1/17 for $9 and sold on 4/29/17 for $8, resulting in a short-term capital loss of $1.

Stock acquired on 1/1/17 for $9 and sold on 4/30/17 for $8, resulting in a short-term capital loss of $1.

Stock acquired on 1/1/15 for $1 and sold on 12/31/17 for $9, resulting in a long-term capital gain of $8.

Stock acquired on 1/2/15 for $1 and sold on 12/30/17 for $3, resulting in a long-term capital gain of $2.

Stock acquired on 1/3/15 for $3 and sold on 4/29/17 for $4, resulting in a long-term capital loss of $1.

Stock acquired on 1/4/15 for $3 and sold on 4/30/17 for $4, resulting in a long-term capital loss of $1.

These stock sales are sales of capital assets that you must report on Schedule D.  Schedule D instructs you to first complete Form 8949. Sales of stock you own for less than a year are sales of short-term capital assets reported on Part I of Form 8949 and sales of stock you held for more than a year are sales of long-term capital assets reported on Part II of Form 8949. Conveniently, the categories on Form 1099-B correspond to those on Form 8949. You compute each stock sale’s gain or loss by subtracting its cost basis  from its proceeds. 

A tally of gains and losses gives a total Part I, net short-term capital gain of $4 to transfer to Part I of Schedule D. The total Part II, net long-term capital gain of $8 will transfer to Part II of Schedule D. Schedule D, Part III uses this information to compute your net allowable capital gain or loss. You have a $12 capital gain

If instead, you had a capital loss and, due to limitations on its deductibility, you had an excess capital loss to carry forward to the next year. Input any capital loss carryforward on line 6 or line 14 of next year’s Schedule D.

Ultimately, the capital gain or loss you compute on Schedule D is combined with your other income and loss to figure your tax on Line 44 of Form 1040. Schedule D and Form 8949 are included with Form 1040 when you file your tax return.

RELATED TERMS
  1. Capital Gains Tax

    A capital gains tax is a tax for capital gains incurred by individuals ...
  2. Capital Loss

    A capital loss is the loss incurred when a capital asset that ...
  3. Individual Tax Return

    An individual tax return is a tax form filed with a tax agency ...
  4. Annualized Income

    Annualized income is an estimate of the amount of money that ...
  5. Income

    Income is money that an individual or business receives on a ...
  6. Long-Term Capital Gain or Loss

    A gain or loss from a qualifying investment owned for longer ...
Related Articles
  1. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  2. Taxes

    Capital Losses and Tax

    Capital losses are never fun to incur, but they can reduce your taxable income. Knowing the rules for capital losses can help you maximize your deductions and make better choices about when to ...
  3. Taxes

    The Purpose Of 1099 Forms

    The need for 1099 forms and why you must track the income reported on them. If you don't, the IRS will find it anyway and go after you – a costly mistake.
  4. Taxes

    Capital Gains Tax 101

    Find out what a capital gain is, how it is calculated, how taxes are applied to your investment returns and how you can reduce your capital gain tax burden.
  5. Taxes

    Comparing Long-Term vs. Short-Term Capital Gains Tax Rates

    Learn about the difference between short- and long-term capital gains and how the duration of your investment can impact your tax liability.
  6. Managing Wealth

    Are You Earning Income or Building Wealth?

    Simply having income does not mean that you also have significant wealth.
  7. Taxes

    Understanding taxation of foreign investments

    Find information on taxation of foreign investments. Learn how the foreign tax credit enables you to deduct most of the tax you've paid abroad.
  8. Taxes

    5 Tax-Efficient Portfolio Tips for High Income Earners

    High income earners can use these tips to make their portfolio more tax-efficient.
  9. Taxes

    Who Does The Current Tax Code Benefit?

    Are the non-workers benefiting from the current tax code in any way or is it the wealthy who are still getting the big breaks?
  10. Taxes

    5 Groups That Don't Pay Taxes

    Now that you've paid your share, find out who didn't have to pay taxes this year.
RELATED FAQS
  1. Is there a difference between capital gains and dividend income?

    Selling something for a profit leads to capital gains. A payment made by a corporations to stockholders is a dividend. Both ... Read Answer >>
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center