Requirements to File IRS Schedule D

Schedule D is a form taxpayers can use to report the capital losses or gains they realize during the year. Taxpayers typically realize capital losses or gains when they sell or otherwise dispose of capital assets. Schedule D may also be necessary when a taxpayer has capital losses to carry over from a previous tax year.

Determining Gain or Loss

If you sold a capital asset during the year that you won't be reporting on any other form, you must typically report these assets on Schedule D. To determine whether each exchange resulted in a loss or gain, you must first calculate your basis in the item, which is the amount you have invested minus any depreciation and adding any improvements you made. The capital loss or gain you have realized is the basis in the item subtracted from sale price of the item minus selling expenses.

Completing the Form

You complete this form by combining the totals of your short-term capital losses or gains from each category of Form 8949 and listing them in the appropriate locations on Schedule D. Short-term losses or gains are those you realize on assets you have owned for less than one year. Next, combine the totals of your long-term capital gains from each category of Form 8949 and list them on Schedule D. Finally, follow the form's instructions to determine whether you have a net gain or loss.

Filing

Before turning in Schedule D, you must transfer relevant information from Part III of Schedule D onto Form 1040. Schedule D is due at the same time as your income tax return. You should attach Schedule D to Form 1040 and turn the documents in to the Internal Revenue Service together. You should also include copies of all Forms 8949 that you used to complete Schedule D.

Considerations

If you have a net capital loss, you can deduct a maximum of $3,000 if you are married filing jointly or $1,500 if you are filing your return alone, as of publication. If you have excess deductible losses, you can carry them over to the next tax year. If you have deductible losses to carry over from the previous tax year, you can include them on line 6 or line 14 of Schedule D.

About the Author

Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.

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