What Is Schedule D? (2024)

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.

How Schedule D Works

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, chief operating officer at GBS Tax and Bookkeeping, spoke with The Balance via email, and said the gains you list on Schedule D are typically from stock sales, but they can also be from sales of other investments, such as a property or business.

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 trust, estate, partnership, or S corporation
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 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.

Can Schedule D Be Filed Online?

You can file Schedule D as a part of an individual tax return or corporate tax return, 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 like Form 1040.

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.

Frequently Asked Questions (FAQs)

Do I need to file Schedule D?

Generally speaking, you'll need to file Schedule D if you've had any capital gains or losses during the tax year.

Why is Schedule D required?

Schedule D is an important document for recording capital gains and losses from individuals, businesses, and partnerships.

I'm well-versed in tax-related matters and Schedule D specifically. The Schedule D form, attached to the Form 1040 tax return, deals with reporting capital gains and losses to the IRS. This schedule is vital for individuals and corporations alike when disclosing gains or losses from the sale of capital assets like stocks, properties, or businesses. Crystal Stranger, COO at GBS Tax and Bookkeeping, discussed the common usage of Schedule D for listing gains predominantly from stock sales but clarified its application extends to various investment sales.

Now, breaking down the concepts:

Schedule D Purpose: It reports capital gains or losses from the sale or exchange of assets not reported elsewhere, involuntary conversions, capital gain distributions not directly reported, effectively connected capital gain distributions, and nonbusiness bad debts.
Users of Schedule D: Individuals or entities needing to calculate overall gains or losses from transactions, report transactions not mandated on other forms, or report gains or losses from specific forms like 2439, 6252, 4684, 6781, 8824, or entities like trusts, estates, partnerships, or S corporations.
Obtaining Schedule D: It's available for download on the IRS website or through tax software. However, filing Schedule D often necessitates filing Form 8949, where sold amounts are itemized and adjusted before transferring to Schedule D.
Schedule D Variants: There's a Schedule D (1040) for individuals and Schedule D (1120) for corporations. Calculation of capital losses differs between the two.
Non-receipt of Schedule D: Lack of physical receipt of Schedule D isn't an issue as information comes through other forms like 1099-B for brokerage transactions or 1099-S for real estate sales. Other transactions like selling personal property for a gain require reporting even without a specific tax form.
Filling and Reading Schedule D: Starting with Form 8949, verifying categorized amounts as long-term or short-term gains is crucial. Long-term property held over a year enjoys lower tax rates, but losses from such property have limitations when offsetting active income.
Filing Schedule D: It's filed online as part of an individual or corporate tax return, never independently, as the tax amounts transfer to the general tax return like Form 1040.
Mailing Schedule D: For those choosing to mail their returns, the IRS directs them to the appropriate address based on their location.

As for FAQs:

Do I need to file Schedule D? Yes, if there are capital gains or losses during the tax year.
Why is Schedule D required? It's crucial for accurately recording and reporting capital gains and losses from various sources like individuals, businesses, and partnerships.