How to File Form 8949 for Capital Gains and Losses

Form 8949, titled “Sales and Other Dispositions of Capital Assets,” is a tax form used to detail capital asset transactions. It reconciles the amounts reported to you and the IRS on documents like Form 1099-B with the figures you report on your tax return. This form works in tandem with Schedule D, providing the underlying details for the summary totals of your capital gains and losses for the tax year.

Every sale or exchange of a capital asset, such as stocks, bonds, or real estate, is reported on this form. It itemizes each transaction for transparency and accuracy in tax reporting. The information from Form 8949 is used to calculate your overall capital gain or loss, which affects your tax liability.

Determining the Filing Requirement for Form 8949

Whether you need to file Form 8949 depends on your financial activities during the tax year. These include transactions involving stocks, bonds, mutual funds, and digital assets like cryptocurrency. The sale of real estate, other than a primary residence that qualifies for a gain exclusion, also requires filing this form.

An exception allows you to report summary totals for certain transactions directly on Schedule D without listing each one on Form 8949. This applies to transactions reported on Form 1099-B where the cost basis was also reported to the IRS and no adjustments to the information are needed. These transactions can be aggregated and reported directly on line 1a (for short-term) or line 8a (for long-term) of Schedule D.

If you have other transactions that do not meet these criteria—for instance, those with an incorrect cost basis, a wash sale adjustment, or sales not reported on a Form 1099-B—you must still file Form 8949 to report those specific transactions. A review of all your transactions is necessary to determine your filing requirements.

Required Information and Source Documents

The primary source document for most filers will be Form 1099-B, which you should receive from your broker. This form details your brokerage transactions and contains the data required for reporting.

Key pieces of information on the 1099-B include the proceeds from the sale, the cost basis of the asset, and the dates of acquisition and disposition. The proceeds represent the total amount you received from the sale. The cost basis is what you originally paid for the asset, including any commissions or fees. The acquisition and sale dates are used to determine whether the transaction is short-term or long-term.

In situations where a Form 1099-B is not issued, such as a private sale of property or certain cryptocurrency transactions, you are responsible for reconstructing these records yourself. Maintaining good records throughout the year ensures you have this information available at tax time.

A Guide to Completing Form 8949

Form 8949 is structured to categorize your transactions for proper tax treatment. The form is divided into two main parts: Part I for short-term transactions and Part II for long-term transactions. A transaction is considered short-term if the asset was held for one year or less, while a long-term transaction involves an asset held for more than one year.

At the top of each part, select a checkbox based on how your transactions were reported. For short-term transactions in Part I, you will check Box A, B, or C. Box A is for transactions reported on a 1099-B where the basis was also reported to the IRS. Box B is for transactions reported on a 1099-B where the basis was not reported to the IRS. Box C is for transactions that were not reported on a 1099-B at all. Part II has a similar set of checkboxes (D, E, and F) for long-term transactions.

Each transaction is listed on a separate row with columns for specific details. Column (a) is for a description of the property sold. Columns (b) and (c) are for the acquisition and sale dates, respectively. Column (d) is for the proceeds, and column (e) is for the cost basis.

Columns (f) and (g) are used for any necessary adjustments. For example, if the basis reported on your 1099-B is incorrect, you would enter the incorrect basis in column (e), and then use columns (f) and (g) to make the correction. Column (f) requires a code (e.g., “B” for an incorrect basis) to explain the adjustment, and column (g) is for the adjustment amount. Column (h) is where you calculate the gain or loss for each transaction.

Transferring Information to Schedule D and Filing

After completing Form 8949, transfer the summary totals to Schedule D, Capital Gains and Losses. You will calculate the totals for columns (d), (e), (g), and (h) at the bottom of each Form 8949 you have filled out. These totals are then carried over to the corresponding lines on Schedule D.

For example, the totals from a Form 8949 with Box A checked in Part I are transferred to line 1b of Schedule D. Similarly, the totals from a Form 8949 with Box D checked in Part II are carried over to line 8b of Schedule D. This process consolidates all your individual transactions into a summary of your short-term and long-term capital gains and losses.

After completing Schedule D, you must attach all the completed Form 8949 pages to it. This entire package is then filed with your Form 1040 tax return. The IRS uses the information on Form 8949 to verify the summary figures on Schedule D, making it a component of a complete tax filing.