Schedule D is the form that brings all your investment sales together. It sits on top of Form 8949, combines short-term and long-term results, and decides how much of a loss you can use this year.
This guide explains the parts of the form, the tax rates that apply to the results, the $3,000 loss limit and carryovers, and the special cases for home sales and business property, with two worked examples. It follows the Schedule D instructions and IRS Topic 409.
Schedule D is the summary form for capital gains and losses. The IRS says to use it to figure the overall gain or loss from transactions reported on Form 8949, to report certain transactions you do not have to list on Form 8949, to report gains from partnerships, S corporations, estates and trusts, to report capital gain distributions not reported directly on Form 1040, and to report a capital loss carryover from the prior year. Complete Form 8949 before you complete lines 1b, 2, 3, 8b, 9 or 10 of Schedule D; see our Form 8949 guide.
Most property you own and use for personal purposes or investment is a capital asset, for example your house, stocks and bonds. Business property is reported elsewhere: Form 4797 covers the sale of real property and depreciable property used in a trade or business.
| Part | What it covers |
|---|---|
| Part I | Short-term gains and losses: assets held one year or less |
| Part II | Long-term gains and losses: assets held more than one year |
| Part III | Summary: combines the net short-term and net long-term results (line 16), then carries gains to the tax computation and limits losses (line 21) |
The holding period for short-term gains and losses is generally 1 year or less, and for long-term gains and losses it is generally more than 1 year. Capital gain distributions from a mutual fund or real estate investment trust come from its net realized long-term capital gains.
Net short-term capital gains are taxed as ordinary income at graduated rates. Net long-term gains are generally taxed at lower rates, with exceptions: net capital gains from selling collectibles are taxed at a maximum 28% rate and the portion of a gain from selling real property that is unrecaptured section 1250 gain is taxed at a maximum 25% rate. When line 18 or 19 of Schedule D is more than zero and lines 15 and 16 are gains, you complete the Schedule D Tax Worksheet; otherwise you use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions. For the 2026 rate thresholds see our capital gains tax brackets guide and real estate capital gains guide.
You can deduct capital losses up to the amount of your capital gains plus $3,000 ($1,500 if married filing separately). You may use losses above that limit in future years. You have a capital loss carryover to the next year if you have a loss on line 16 that is more than the loss allowed on line 21, or if your taxable income would be below zero; you figure it with the Capital Loss Carryover Worksheet in the next year's instructions (or Pub. 550). You cannot deduct a loss from a sale or exchange between certain related parties, such as members of a family.
Next-year note: the 2026 Schedule D instructions were not yet published as of 26 October 2026. The IRS early-release draft of the 2026 Schedule D keeps the same line 21 limit, the smaller of the line 16 loss or $3,000 ($1,500 if married filing separately). It is a draft, not final.
You may not need to report the sale of your main home. You must report it on Form 8949 if you cannot exclude all of the gain or if you received Form 1099-S. Form 6781 covers section 1256 contracts, Form 8824 like-kind exchanges and Form 8960 the net investment income tax on gains reported on Schedule D. See our selling your home tax guide.
Example 1: a loss within the limit. An investor has $3,000 of short-term gains and $1,200 of short-term losses, and $10,000 of long-term gains and $14,500 of long-term losses.
| Step | Amount |
|---|---|
| Net short-term (Part I) | $1,800 |
| Net long-term (Part II) | ($4,500) |
| Combined (line 16) | ($2,700) |
| Deductible loss, limited to $3,000 | $2,700 |
| Carryover | $0 |
Example 2: a loss above the limit. With long-term losses of $19,000 instead, the long-term result is a $9,000 loss and the combined loss is $7,200. Only $3,000 is deductible this year and $4,200 carries over to next year. These are illustrations.
Instructions for Schedule D (Form 1040) (2025), IRS Topic no. 409: Capital gains and losses, IRS Publication 550.