What Is Tax Form 8949: Sales of Capital Assets?
Learn how Form 8949 is used to reconcile broker-reported sales data with your final tax figures, ensuring accurate reporting of capital gains and losses.
Form 8949, Sales and Other Dispositions of Capital Assets, is a tax form used to report the sale or exchange of capital assets. Its function is to reconcile the amounts reported to you by a broker on Form 1099-B with the figures you report on your tax return. This form provides the specifics behind the summary totals that eventually appear on Schedule D, ensuring a clear record of your capital asset transactions for the year.
Determining if You Need to File Form 8949
If you have a capital gain or loss to report, you must file Form 8949 before completing Schedule D. This applies to individuals, corporations, and trusts that sell or exchange capital assets like stocks or bonds during the tax year.
An exception exists that may allow you to bypass Form 8949. If you received a Form 1099-B from your broker that shows your cost basis was reported to the IRS, you might not need to file Form 8949 for those specific transactions. This exception only applies if the Form 1099-B does not show any adjustments in box 1f or 1g.
Under this exception, you can report the summary totals directly on Schedule D. Short-term transactions that meet these criteria can be aggregated and reported on line 1a of Schedule D. Long-term transactions that qualify are reported on line 8a of Schedule D. If you have any transaction that does not meet these specific conditions, such as a sale of collectibles or a transaction requiring an adjustment, you must report it on Form 8949.
Information and Documents Needed
The primary document you will need is Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from your broker. This form contains most of the data required, including the proceeds from the sale, transaction dates, and often the cost basis. For each transaction, you will need to list a description of the property, the date you acquired it, and the date you sold it.
To organize your information, you must understand the checkboxes at the top of Form 8949. The form is divided into Part I for short-term transactions (assets held one year or less) and Part II for long-term transactions (assets held more than one year). Within each part, three checkboxes categorize your transactions based on what was reported to the IRS.
Your Form 1099-B will determine which box to check for each sale. You will use Box A (for short-term) or Box D (for long-term) for transactions where your broker reported the cost basis to the IRS. Box B or E is used when the broker did not report the cost basis to the IRS. Box C or F is for transactions that were not reported on a Form 1099-B, such as the sale of a personal item at a gain. Each transaction must be sorted into one of these categories, and you may need to file multiple copies of Form 8949 if you have transactions in several categories.
How to Complete Form 8949
Part I is for reporting short-term capital gains and losses, while Part II is for long-term transactions. You will complete a separate Part I or Part II for each of the categories (A, B, C or D, E, F) that apply to your sales for the year.
The main body of the form consists of columns where you enter the details for each transaction.
- (a) Description of the property sold.
- (b) Date you acquired it.
- (c) Date you sold it.
- (d) Proceeds from the sale, entered exactly as shown on your Form 1099-B.
- (e) Cost or other basis of the asset, entered as shown on your 1099-B if reported.
Columns (f) and (g) are for any adjustments to the gain or loss. Column (f) requires a specific code from the Form 8949 instructions to explain the adjustment. For example, you would enter code ‘W’ for a wash sale or ‘B’ if the basis on Form 1099-B is incorrect. The corresponding monetary adjustment is then entered in column (g).
Finally, you calculate the gain or loss for each transaction in column (h) by subtracting the basis in column (e) from the proceeds in column (d) and factoring in any adjustment from column (g). After listing all transactions for a specific category, you will sum the totals for columns (d), (e), (g), and (h) at the bottom of the page.
Reporting Form 8949 Totals on Schedule D
After completing all necessary copies of Form 8949, you transfer the summary totals to Schedule D (Form 1040), Capital Gains and Losses. Schedule D uses these totals to calculate your overall net capital gain or loss for the year. The summed totals from the bottom of each completed Form 8949 page are carried over to the corresponding lines on Schedule D.
For short-term transactions from Part I of Form 8949, the totals are transferred to lines 1b, 2, and 3 of Schedule D, depending on which box (A, B, or C) was checked. For example, the totals from a Form 8949 with Box A checked are entered on line 1b of Schedule D.
Similarly, the totals from Part II of Form 8949 for long-term transactions are carried over to the long-term section of Schedule D. The summary figures are entered on lines 8b, 9, and 10, corresponding to the box (D, E, or F) you checked. For instance, totals from a Form 8949 with Box D checked are reported on line 8b of Schedule D.