What the Form Is For

Schedule D (Form 1040) is the IRS form used to report capital gains and losses from the sale or exchange of capital assets during the 2015 tax year. Capital assets include most property you own for personal purposes or investment—such as your home, stocks, bonds, mutual funds, real estate, and other investments.

You must use Schedule D to figure your overall gain or loss from transactions reported on Form 8949, report certain transactions that don't require Form 8949, and calculate your total capital gain or loss for the year. The form separates transactions into two main categories: short-term (assets held one year or less) and long-term (assets held more than one year). This distinction matters because long-term capital gains generally receive preferential tax treatment.

According to the official IRS instructions, you'll use Schedule D to report gains from Forms 2439, 6252, 4797, 4684, 6781, or 8824; capital gain distributions not reported directly on your Form 1040; gains or losses from partnerships, S corporations, estates, or trusts; and any capital loss carryover from 2014 to 2015.

When You'd Use It (Including Late or Amended Filings)

You must file Schedule D with your 2015 Form 1040 if you sold or exchanged capital assets during the year, received capital gain distributions from mutual funds or real estate investment trusts, have capital loss carryovers from previous years, or received a Form 1099-S for the sale of your main home (even if the gain is excludable).

Original Filing

Schedule D should be attached to your Form 1040 by the April 15, 2016 deadline (or October 15, 2016 if you filed for an extension).

Amended Returns

If you discover errors after filing—such as incorrect basis amounts, missing transactions, or miscalculated gains or losses—you'll need to file Form 1040-X (Amended U.S. Individual Income Tax Return). According to IRS Topic 308, you generally have three years from the date you filed your original return or two years from the date you paid the tax (whichever is later) to file an amended return and claim a refund. For 2015 returns filed by April 15, 2016, this means you typically have until April 15, 2019 to amend.

Important note: You don't need to amend for simple math errors—the IRS will correct those automatically. However, substantive errors like unreported sales, incorrect cost basis, or missing capital loss carryovers require filing Form 1040-X with a corrected Schedule D attached.

Key Rules for the 2015 Tax Year

Holding Period Requirements

The holding period determines whether your gain or loss is short-term or long-term. Short-term applies to assets held one year or less; long-term applies to assets held more than one year. This distinction significantly impacts your tax rate.

Capital Loss Limitations

You can deduct capital losses up to the amount of your capital gains plus $3,000 ($1,500 if married filing separately). Losses exceeding this limit carry forward to future years indefinitely.

Tax Rates for 2015

For long-term capital gains, the 0% rate applied to taxpayers in the 10% and 15% ordinary income tax brackets. The 15% rate applied to most middle-income taxpayers, while the 20% maximum rate applied to high-income taxpayers (single filers with taxable income above $413,200 or joint filers above $464,850). Short-term capital gains are taxed at ordinary income rates.

Form 8949 Requirement

For 2015, most capital asset transactions must first be reported on Form 8949 (Sales and Other Dispositions of Capital Assets) before completing Schedule D. The IRS instructions specify that you must complete Form 8949 before entering amounts on lines 1b, 2, 3, 8b, 9, or 10 of Schedule D.

Qualified Small Business Stock

For 2015, you could exclude up to 100% of eligible gain on qualified small business (QSB) stock acquired after September 27, 2010 and held for more than 5 years—a significant benefit for early-stage investors.

Home Sale Exclusion

You can exclude up to $250,000 of gain ($500,000 if married filing jointly) from the sale of your main home if you meet the ownership and use tests—you must have owned and lived in the home as your main residence for at least 2 of the 5 years before the sale.

Step-by-Step Filing Process (High Level)

Step 1: Gather Documentation

Collect all Forms 1099-B from brokers, Forms 1099-S for real estate sales, records of purchase dates and costs (basis), and documentation of any adjustments to basis such as commissions, improvements, or wash sales.

Step 2: Complete Form 8949

Report each capital asset transaction on Form 8949, organized by category (short-term or long-term) and by whether your broker reported the basis to the IRS. For each transaction, enter the description, dates acquired and sold, proceeds, cost basis, and any adjustments. Calculate the gain or loss for each transaction.

Step 3: Transfer Totals to Schedule D

Transfer the summary totals from Form 8949 to the appropriate lines of Schedule D—short-term transactions go to Part I (lines 1-7) and long-term transactions go to Part II (lines 8-15).

Step 4: Add Other Capital Transactions

Include any capital gain distributions from mutual funds (line 13), gains from installment sales reported on Form 6252, and any capital loss carryover from 2014.

Step 5: Calculate Your Net Gain or Loss

Complete Part III to combine your short-term and long-term results. If you have a net gain, you may need to complete additional worksheets (the Qualified Dividends and Capital Gain Tax Worksheet, the Schedule D Tax Worksheet, or specialized worksheets for 28% rate gains or unrecaptured Section 1250 gains). If you have a net loss, determine how much you can deduct in 2015 (up to $3,000) and how much carries forward to 2016.

Step 6: Report on Form 1040

Enter your final capital gain or deductible loss on Form 1040, line 13. If you have qualified dividends and capital gains, use the special tax computation worksheet to calculate your tax at the preferential rates.

Common Mistakes and How to Avoid Them

Mistake 1: Forgetting to Report All Transactions

Some taxpayers fail to report sales that don't appear on a 1099-B or transactions from foreign accounts. Avoidance: Report every sale or exchange of capital assets, even if you didn't receive a 1099-B. The IRS matches reported income, and unreported transactions can trigger audits and penalties.

Mistake 2: Using Incorrect Cost Basis

Many taxpayers use the wrong basis, especially for inherited property, gifted assets, or stock acquired through dividend reinvestment plans. Avoidance: For purchased assets, your basis is the purchase price plus commissions. For inherited property, use the fair market value on the date of death. Keep detailed records of all transactions, including reinvested dividends that increase your basis.

Mistake 3: Incorrectly Classifying Holding Periods

Confusion about whether a gain is short-term or long-term can result in higher taxes. Avoidance: Count from the day after you acquired the property to the day you sold it. "More than one year" means at least one year and one day.

Mistake 4: Not Applying Wash Sale Rules

Taxpayers often claim losses on stock sales when they've repurchased substantially identical securities within 30 days before or after the sale. Avoidance: The wash sale rule disallows the loss deduction but adds it to the basis of the replacement shares. If your broker reports this on Form 1099-B, transfer that information correctly to Form 8949. If you made trades across multiple accounts, manually identify and report wash sales.

Mistake 5: Overlooking Capital Loss Carryovers

Failing to track and carry forward unused capital losses from prior years means losing valuable deductions. Avoidance: Use the Capital Loss Carryover Worksheet in the Schedule D instructions to calculate your carryover. Enter short-term carryover on Schedule D line 6 and long-term carryover on line 14.

Mistake 6: Misreporting Home Sales

Taxpayers sometimes report home sales unnecessarily or fail to properly calculate the excludable gain. Avoidance: You only need to report your home sale if you can't exclude all the gain or you received Form 1099-S. Use IRS Publication 523 to determine your exclusion amount and properly report any taxable gain.

Mistake 7: Mixing Up Form 8949 Box Categories

The IRS instructions specify different checkboxes based on whether basis was reported to the IRS and whether you need adjustments. Avoidance: Carefully match your transactions to the correct box (A, B, or C for short-term; D, E, or F for long-term) following the Form 8949 instructions exactly.

What Happens After You File

Once you file Schedule D with your Form 1040, several things occur:

IRS Processing

The IRS will match the capital gain and loss information on your Schedule D against Forms 1099-B and 1099-S reported by brokers and real estate settlement agents. This computerized matching typically occurs 12-18 months after filing. Discrepancies may trigger an inquiry or audit notice.

Tax Calculation

If you reported a net capital gain, it will be added to your taxable income, though long-term gains benefit from lower tax rates (0%, 15%, or 20% for 2015, depending on your tax bracket). If you reported a capital loss, up to $3,000 reduces your taxable income.

Refund or Payment

Your capital gains increase your tax liability, while capital losses (up to the limit) reduce it. This affects your final refund or balance due. Most taxpayers filing in early 2016 received refunds within 21 days for e-filed returns.

Capital Loss Carryforward

If your capital losses exceed your gains by more than $3,000, the excess carries forward indefinitely to future tax years. You'll need to track this carryover amount carefully and report it on your 2016 Schedule D, line 6 (short-term) or line 14 (long-term). The IRS doesn't automatically track carryovers for you.

Audit Selection

Returns with Schedule D can be selected for audit if the IRS identifies potential issues such as unreported transactions, inconsistent basis reporting, or unusual patterns. Complex transactions involving partnerships, trusts, or specialized assets receive closer scrutiny.

Record Retention

Keep all supporting documents—brokerage statements, purchase confirmations, sale confirmations, and Form 8949—for at least three years after filing. For carryover losses, maintain records until the carryover is completely used.

FAQs

Q1: Do I have to file Schedule D if I only have capital gain distributions from mutual funds?

According to the IRS instructions, if your only capital gains are capital gain distributions reported on Form 1099-DIV and you don't have any sales of capital assets, you generally can report these distributions directly on Form 1040, line 13, without filing Schedule D. However, if the distributions include any amounts requiring special treatment (such as 28% rate gains or unrecaptured Section 1250 gains shown in boxes 2b or 2d of Form 1099-DIV), you must complete Schedule D.

Q2: What's the difference between Schedule D and Form 8949?

Form 8949 is where you list each individual capital asset transaction with its specific details—description, dates, proceeds, cost basis, adjustments, and gain or loss. Schedule D is the summary form where you total up all the transactions from Form 8949 and calculate your overall net capital gain or loss. Think of Form 8949 as the detailed worksheet and Schedule D as the final summary that attaches to your Form 1040.

Q3: Can I deduct capital losses from my 2015 return if I forgot to claim them initially?

Yes, but you must file Form 1040-X (Amended Return) with a corrected Schedule D. You generally have three years from your original filing date to amend. For a 2015 return filed in April 2016, you typically have until April 2019 to amend. However, you cannot create or increase a capital loss carryover by amending after the statute of limitations expires.

Q4: How do I report the sale of my home on Schedule D?

If you must report your home sale (because you can't exclude all the gain or received Form 1099-S), first report it on Form 8949—Part I if you owned it one year or less, Part II if more than one year. Check box C (short-term) or box F (long-term). If you qualify to exclude part of the gain, enter "H" in column (f) of Form 8949 and enter the exclusion amount as a negative number in parentheses in column (g). The net taxable gain then flows to Schedule D. See IRS Publication 523 for complete details on home sale reporting.

Q5: What happens if I sold stock at a loss and bought it back within 30 days?

This triggers the wash sale rule. You cannot deduct the loss in 2015; instead, the disallowed loss is added to the cost basis of the replacement shares. Your broker should report this on Form 1099-B if the transactions occurred in the same account. On Form 8949, enter "W" in column (f) and enter the disallowed loss as a positive number in column (g). When you eventually sell the replacement shares, you'll recover the benefit of the original loss through the adjusted higher basis.

Q6: Do I need to report capital gains from sales in my IRA or 401(k)?

No. According to IRS rules, you don't report individual transactions within tax-deferred retirement accounts like IRAs, 401(k)s, or 403(b)s on Schedule D. Taxes are deferred until you make withdrawals from these accounts, at which point withdrawals are typically taxed as ordinary income (not capital gains), regardless of how the money was earned inside the account.

Q7: What if my capital losses exceed $3,000?

You can only deduct up to $3,000 of net capital losses ($1,500 if married filing separately) against your other income in 2015. The excess carries forward indefinitely to future tax years. Use the Capital Loss Carryover Worksheet in the Schedule D instructions to calculate how much carries to 2016. You'll report this carryover amount on your 2016 Schedule D, lines 6 (short-term) and 14 (long-term), and continue carrying it forward until fully used.

Sources

For Complete Information: All details in this summary come from the official IRS 2015 Schedule D instructions and forms, available at IRS.gov. For specific situations involving complex transactions, consult IRS Publications 550 (Investment Income and Expenses) and 544 (Sales and Other Dispositions of Assets).