IRS Schedule D “Capital Gains and Losses” Explained

Schedule D (Form 1040), Capital Gains and Losses, is where you total the gains and losses from selling capital assets such as stocks, bonds, mutual funds, cryptocurrency, and investment real estate. Most individual sales are first listed on Form 8949, and the totals carry to Schedule D.

Short-Term vs. Long-Term

• Short-term: assets held one year or less. Gains are taxed at your ordinary income tax rates.
• Long-term: assets held more than one year. Gains are taxed at the lower 0%, 15% or 20% rates.

2026 Long-Term Capital Gains Rates

• 0%: taxable income up to $49,450 single, $98,900 married filing jointly, $66,200 head of household
• 15%: up to $545,500 single, $613,700 married filing jointly, $579,600 head of household
• 20%: above those amounts

These thresholds come from IRS inflation adjustments summarized by the Tax Foundation. Some gains are taxed differently: collectibles at up to 28%, and unrecaptured Section 1250 gain from depreciated real estate at up to 25%. Higher-income taxpayers may also owe the 3.8% net investment income tax.

How Schedule D Works

1. Report each sale on Form 8949 with the date acquired, date sold, proceeds, cost basis and any adjustments. Sales your broker reported with basis to the IRS, with no adjustments, can go directly on Schedule D.
2. Part I totals short-term gains and losses, and Part II totals long-term ones. Capital gain distributions from Form 1099-DIV and gains from K-1s and Form 4797 also flow here.
3. Part III nets them and determines how the gain is taxed.

Capital Losses

Net capital losses can offset up to $3,000 of ordinary income a year ($1,500 if married filing separately). Unused losses carry forward indefinitely. Losses on personal-use property, like your car or home, aren’t deductible.

Common Mistakes

• Wrong basis: reinvested dividends, stock compensation and inherited assets (usually stepped up to fair market value at death) are frequently misreported.
• Wash sales: a loss is disallowed if you buy substantially identical securities within 30 days before or after the sale. The disallowed loss is added to the new shares’ basis.
• Missing crypto transactions: trading one cryptocurrency for another, or spending it, is a taxable sale.
• Home sales: gain above the Section 121 exclusion is reported here.

Planning Opportunities

Harvest losses to offset gains, time sales to land in a lower bracket, use the 0% bracket in low-income years, and donate appreciated shares instead of cash. Related: Schedule B and Schedule E.

Get Help From Diehl CPA

Tax rules change often, and the right answer depends on your full financial picture. Diehl CPA, led by Mark Diehl, CPA, CFE, prepares returns and builds tax plans for investors, retirees and closely held businesses. Learn about our tax return preparation and investment tax planning services, or contact us to talk through your situation.

This article is general information, not tax or legal advice for your specific situation. Updated October 2026.