Updated October 2, 2026. Quick answer: Schedule D is where capital gains and losses are netted into one number for Form 1040. Form 8949 totals feed lines 1b, 2, 3, 8b, 9 and 10, short-term results go in Part I, long-term in Part II, and Part III combines them. A net loss reduces income only up to $3,000 ($1,500 if married filing separately) a year; the rest is a carryover.
Related reading on this site: IRS Publication 544.
More IRS forms and schedules for individual filers, read line by line: Form 8828 instructions and Form 6781 instructions.
Related reading on this site: IRS Publication 550.
Read box by box from the IRS form text: Form 2439 boxes 1a to 1d and Form 2439 box 2.
Read box by box from the IRS form text: Form 1099-SB boxes 1 and 2.
S corporation return (Form 1120-S) for 2025, read line by line: Form 1120-S Schedule B questions 13 to 16 and Form 1120-S Schedule K lines 5 to 10.
Partnership return (Form 1065) for 2025, read line by line: Form 1065 Schedule K lines 5 to 11.
IRS worksheets read line by line: Capital Loss Carryover Worksheet.
IRS worksheets from the 2025 Form 1040 instructions, read line by line: Schedule D Tax Worksheet and Form 1040 worksheets.
Sales of business property (Form 4797), passive activity losses (Form 8582) and depreciation (Form 4562) for 2025, read line by line: Form 4797 line 1a, Form 4797 line 2 and Form 4797 lines 25 to 32.
Schedule D and Schedule E (Form 1040) for 2025, read line by line: Schedule D line 8a, Schedule D lines 13 to 15 and Schedule D line 20.
Schedule 2 (Form 1040) for 2025, read line by line: Schedule 2 line 12.
Schedule 1 (Form 1040) for 2025, read line by line: Schedule 1 lines 8g to 8k, Schedule 1 lines 8t to 8z and Schedule 1 lines 9 and 10.
Form 8949 for 2025, read code by code: Form 8949 boxes A to L, Form 8949 code E and Form 8949 code H.
Form 1040 for 2025, lines 12 to 38 read line by line: Form 1040 line 16.
Form 1040 for 2025, read line by line: Form 1040 line by line, Form 1040 line 1z and Form 1040 lines 3a and 3b.
Read box by box from the IRS form text: Form 1099-DA boxes explained, Form 1099-DA box 6 and Form 1099-DA box 11.
The recipient copy of Form 1099-NEC or 1099-MISC, read box by box: 1099-MISC box 8.
More IRS forms and schedules, read line by line: Form 7203 instructions.
The shareholder’s Schedule K-1 (Form 1120-S), boxes 13 to 19: Schedule K-1 box 16 and Schedule K-1 box 17 codes K to O.
The shareholder’s Schedule K-1 (Form 1120-S), read box by box: Schedule K-1 boxes 7 and 8, Schedule K-1 box 9 and Schedule K-1 box 10.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 11, Schedule K-1 box 19 and Schedule K-1 box 20 O and P.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 8, Schedule K-1 box 9 and Schedule K-1 box 10.
More IRS forms and schedules, read line by line: Form 1040 instructions and Form 6198 instructions.
More IRS forms and schedules, read line by line: Form 6252 instructions.
More IRS forms and schedules, read line by line: Form 1099-MISC instructions and Form 1099-S instructions.
The IRS form or worksheet behind this, read line by line: Form 4797 instructions and Form 8824 instructions.
Price a sale against the 2026 capital gains rates: capital gains tax calculator.
What Schedule D is for
The instructions open with a list of uses. The first is “To figure the overall gain or loss from transactions reported on Form 8949”. They also say “Complete Form 8949 before you complete line 1b, 2, 3, 8b, 9, or 10 of Schedule D.” So the order is Form 8949 first (see the Form 8949 guide), then Schedule D.
The 2025 forms and instructions are the revision the IRS serves at the time this page was read (October 2, 2026), and they are the ones used for returns filed in 2026. A later revision may renumber lines, so check the line numbers against the form you are holding.
Parts I, II and III
Holding period decides the part: “Report short-term gains or losses in Part I. Report long-term gains or losses in Part II.” “The holding period for short-term capital gains and losses is generally 1 year or less.”
Part III combines the two. Publication 550 describes the step: “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.”
How Form 8949 totals reach Schedule D
The Form 8949 instructions say: “Include on your Schedule D the totals from all your Parts I and II.” They also tie the boxes you check to Schedule D lines: “the total of the amounts in column (h) of line 2 of all your Forms 8949 with box A or box G checked should equal the amount you get by combining columns (d), (e), and (g) on line 1b of Schedule D.” Within each Schedule D line, “First, subtract the cost or other basis in column (e) from the proceeds (sales price) in column (d). Then combine the result with any adjustments in column (g).”
Some trades can skip Form 8949. The Schedule D instructions allow aggregate totals on line 1a (short term) or line 8a (long term) only when the 1099-B or 1099-DA shows basis was reported to the IRS and no adjustment is needed. Capital gain distributions go elsewhere: “Enter on Schedule D, line 13, the total capital gain distributions paid to you during the year, regardless of how long you held your investment.”
| Part | Lines covered on this page | Result |
|---|---|---|
| Part I, short term | 1a, 1b, 2, 3 | Net short-term gain or loss on line 7 |
| Part II, long term | 8a, 8b, 9, 10, 13 | Net long-term gain or loss on line 15 |
| Part III, summary | 16 and following | Line 7 plus line 15 equals line 16 |
The loss limit
The Schedule D instructions state the cap: “You can deduct capital losses up to the amount of your capital gains plus $3,000 ($1,500 if married filing separately).” Publication 550 words it as a lesser-of test: “$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).” The deduction is reported “on Form 1040, line 7a, enclosed in parentheses.”
Its example: “The sales resulted in a capital loss of $7,000.” “On their joint 2025 return, they can deduct $3,000.” “The unused part of the loss, $4,000 ($7,000 − $3,000), can be carried over to 2026.”
The Capital Loss Carryover Worksheet, lines 6 and 14
Last year’s unused loss comes back through a worksheet in the instructions: “Use this worksheet to figure your capital loss carryovers from 2024 to 2025 if your 2024 Schedule D, line 21, is a loss” and the other tests on the worksheet are met. The result lands in two places. For the short-term piece the worksheet says “If more than zero, also enter this amount on Schedule D, line 6”, and the long-term piece goes on line 14 the same way.
Carryovers keep their character: “When you carry over a loss, it remains long-term or short-term.” “When you figure your capital loss carryover, use your short-term capital losses first”. For spouses who once filed jointly: “any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss.” A related live page covers the estate and trust carryover case.
Which tax worksheet follows
After Schedule D, tax on line 16 of Form 1040 is figured with a worksheet when gains are present. The Form 1040 instructions say to use the Schedule D Tax Worksheet if “You have to file Schedule D, line 18 or 19 of Schedule D is more than zero, and lines 15 and 16 of Schedule D are gains”. The Qualified Dividends and Capital Gain Tax Worksheet applies if “You are filing Schedule D, and Schedule D, lines 15 and 16, are both more than zero.” Schedule D lines 18 and 19 are where 28% rate gain and unrecaptured section 1250 gain are reported. The second worksheet is walked through line by line on the qualified dividends worksheet page.
Every Schedule D line page in one table
Each row links to the page that reads a line, or group of lines, of Schedule D. The right column is the summary each page carries.
| Page | What it covers |
|---|---|
| Schedule D Line 1a: Short-Term Totals, Basis Reported (2025) | How Schedule D line 1a works on the 2025 return: when short-term sales with basis reported to the IRS can skip Form 8949 and be totaled on one line. |
| Schedule D Lines 1b, 2 and 3: Short-Term Totals (2025) | How Schedule D lines 1b, 2 and 3 work on the 2025 return: short-term totals carried from Form 8949 by box checked, and how column (h) is figured. |
| Schedule D Lines 4 and 5: Short-Term Gain From Other Forms | How Schedule D lines 4 and 5 work on the 2025 return: short-term gain from Forms 6252, 4684, 6781 and 8824, and short-term K-1 amounts. |
| Schedule D Lines 6 and 7: Short-Term Carryover and Net | How Schedule D lines 6 and 7 work on the 2025 return: the short-term capital loss carryover from the worksheet and the net short-term total. |
| Schedule D Line 8a: Long-Term Totals, Basis Reported (2025) | How Schedule D line 8a works on the 2025 return: when long-term sales with basis reported to the IRS can skip Form 8949, with the IRS’s own examples. |
| Schedule D Lines 8b, 9 and 10: Long-Term Totals (2025) | How Schedule D lines 8b, 9 and 10 work on the 2025 return: long-term totals carried from Form 8949 by box checked, and how column (h) is figured. |
| Schedule D Lines 11 and 12: Other Forms and K-1s (2025) | What goes on Schedule D lines 11 and 12 for 2025: long-term gain from Forms 4797, 2439, 6252 and others, and long-term gain or loss from Schedule K-1. |
| Schedule D Lines 13 to 15: Distributions and Carryover (2025) | Schedule D lines 13 to 15 for 2025: capital gain distributions from Form 1099-DIV box 2a, the long-term loss carryover, and the net long-term total. |
| Schedule D Lines 16 and 17: Combined Result (2025) | Schedule D lines 16 and 17 for 2025: combine lines 7 and 15, then see where a gain, loss or zero sends you and what the both gains test decides. |
| Schedule D Line 18: 28% Rate Gain Worksheet (2025) | Schedule D line 18 for 2025: when the 28% Rate Gain Worksheet is required, what counts as a collectibles gain or QSB stock exclusion, and where the result goes. |
| Schedule D Line 19: Unrecaptured Section 1250 Gain (2025) | Schedule D line 19 for 2025: when the Unrecaptured Section 1250 Gain Worksheet is required for sales of depreciated real property, and where the result goes. |
| Schedule D Line 20: Which Tax Worksheet to Use (2025) | Schedule D line 20 for 2025: the yes or no test that decides between the Qualified Dividends and Capital Gain Tax Worksheet and the Schedule D Tax Worksheet. |
| Schedule D Lines 21 and 22: Loss Limit and Dividends (2025) | Schedule D lines 21 and 22 for 2025: the capital loss deduction limit, how a carryover to 2026 arises, and the qualified dividends question. |
Common mistakes
- Skipping Form 8949 when the 1099-B shows an adjustment code or when basis was not reported to the IRS. The line 1a and 8a shortcut has conditions.
- Deducting a net loss in full. Only the limit comes off income this year; the rest is a carryover to line 6 or line 14 next year.
- Forgetting the carryover because last year’s return was filed by someone else. The worksheet needs last year’s Schedule D lines 7, 15 and 21.
Related: Form 8949 explained, the wash sale rule, tax loss harvesting, the capital loss harvest helper, and the qualified dividends worksheet.
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Answer againSources
- Instructions for Schedule D (Form 1040) (2025): https://www.irs.gov/pub/irs-pdf/i1040sd.pdf
- Instructions for Form 8949 (2025): https://www.irs.gov/pub/irs-pdf/i8949.pdf
- IRS Publication 550, Investment Income and Expenses (2025): https://www.irs.gov/pub/irs-pdf/p550.pdf
- 2025 Instructions for Form 1040: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
Read from the IRS documents linked above on October 2, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.