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Tax Form 8949 – Instructions for Reporting Capital Gains & Losses

By Kira Botkin

In an effort to help make filing taxes easier this year, we are breaking down the various IRS tax forms to help you know if you need them, and how to use them.

cash pen capital gainsIf you have capital gains or losses to report on your taxes, you’ll want to be aware of a recent process change. Instead of totaling up your transactions on Schedule D, the IRS requires you to list them out on Form 8949.

It’s a bit complicated to get started, but once you’re organized, you’ll be able to fill out the Form 8949 and Schedule D very quickly.

Learn more about Form 8949 and the changes in how you report capital gains and losses on the your taxes below.

What Are Capital Gains and Losses?

When you sell a capital asset (which is pretty much anything you own – including your possessions, stocks, collectibles, and vehicles), you generate a capital gain if you make money on the transaction, and a capital loss if you lose money on the transaction.

The IRS requires you to report the income from all capital gains so that you can pay the proper amount of income tax, but will also allow you to take a tax deduction on certain types of capital losses. For example, you can claim a capital loss if you lose money on the sale of stocks, but you cannot claim a capital loss if you lose money on the sale of your personal residence.

Capital gains and losses come in two varieties – short-term and long-term. Short term refers to something you owned less than a year, and long-term refers to something you owned for one year or more. If you own a painting for less than a year and sell it for less than you bought it for, that would be a short-term capital loss. If you own a share of stock for more than a year, and sell it for more than you bought it for, that would be a long-term capital gain.

New Basis Reporting Forms

The IRS is recruiting your broker to help you out when you’re calculating your gain or loss. If you’ve sold stocks, bonds, mutual funds, or other items through a broker, the broker may report the price you paid for the item (known as the basis) on your 1099-B form.

However, you may also receive a 1099-B without the basis reported on it. In this case, you’ll need to check your own records to determine the proper basis amount. You use the basis to determine how much of the final selling price is a gain or a loss. On the new Form 8949, you’ll be asked to group your items by whether the broker reported the basis or not. If the basis is reported for some transactions, but not for others, you may end up filing several 8949 forms.

8949 tax form

Reporting Capital Gains & Losses on Form 8949

The actual information you’ll report on Form 8949 isn’t complicated, but organizing what page you’ll put it on might be. Before filling out the forms, make a list of all your gains and losses. Then, determine if you have a 1099-B for each of the transactions. Next, divide your transactions into six separate groups as shown below.

Page One:

  • Short-term transactions reported on a 1099-B, where the basis was reported to the IRS
  • Short-term transactions reported on a 1099-B, where the basis was not reported to the IRS
  • Short-term transactions that don’t have a 1099-B

Page Two:

  • Long-term transactions reported on a 1099-B, where the basis was reported to the IRS
  • Long-term transactions reported on a 1099-B, where the basis was not reported to the IRS
  • Long-term transactions that don’t have a 1099-B

On page one of Form 8949, you report short-term transactions, and on page two, you report long-term transactions. However, you must fill out a separate Form 8949 for transactions that would be reported on the same page, but do not fall in the same category.

For example, if you received 1099-B forms for three short-term transactions, but the basis was not reported to the IRS on one, you must fill out a separate Form 8949 for the transaction in which the basis was not reported. If you have a number of capital gains or losses to report, you could easily end up filing multiple forms. For this reason, it’s imperative to be organized before you start.

Information You Need for Each Transaction

Once you’ve sorted your transactions, you can begin completing the form. Each transaction requires several specific pieces of information:

  • Date Acquired. This is the date that you purchased or were given the property.
  • Date Sold. This is the date that you sold the property.
  • Sales Price. This is the amount that you sold the property for. If your broker reported the sales price to the IRS (on your 1099-B) with commissions or other fees already subtracted, report that price.
  • Cost or Other Basis. This is the amount that you paid for the property plus any commissions or other fees. If you received the property as a gift, your basis is what the previous owner paid for it. If you received it as an inheritance, its basis is its value on the day the previous owner passed away.

If anything more exciting than a simple purchase and sale happened with the property, you may also need to mark the transaction with a special code. For example, a code would be required if the basis was reported incorrectly on the 1099-B you received. Check the Schedule D instructions on page D-10 for more information.

Most transactions won’t need any code. After you have completed a Form 8949 for each group, you’ll complete Schedule D with the information from the forms to arrive at a total gain or loss for each group. From there you will determine the total gain or loss from short-term transactions and long-term transactions and ultimately adjust your income accordingly.

Final Word

While Form 8949 may look complicated, it’ll be a lot quicker to complete with the new IRS rules requiring your broker to help you out. Keeping good records from the start will make it easier to complete as well. And make sure that every 1099-B you receive matches up to transactions on your Form 8949 to avoid any hassles. Once you’re finished, it’ll be a snap to complete your schedule D.

Kira Botkin
Kira is a longtime blogger and serial entrepreneur who enjoys gardening, garage sales, and finding stray animals. She lives in Columbus, Ohio, where football is a distinct season, and by day runs a research study for people with multiple sclerosis. She hopes that the MoneyCrashers team can help you achieve your goals and live a great life.

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  • Jmjindu

    What if you sold personal property and received a 1099-S and sold personal property and didn’t receive a 1099-S, they are both long term properties? My mom received one 1099-S and the other sale only has a Notice of Satisfaction and Completion of Terms of Contract for Deed…do they both get reported on the 8949?

    • Kira Botkin

      Yes, I think that is the right course. She would put them down as long-term capital gains, under the third option since she got a 1099-S and not a 1099-B.

  • Bryan

    We have pages of transactions that seem to be meant for this new Form 8949. Surely there must be a way of importing all that information onto the 8949. Any thoughts?

    • Kira Botkin

      It would depend on what you’re importing it from, and whether it’s already been categorized as listed here. I have not seen any programs to do it though but you might check with an accountant.

    • Kira Botkin

      It would depend on what you’re importing it from, and whether it’s already been categorized as listed here. I have not seen any programs to do it though but you might check with an accountant.

  • AndrewEsposito

    Vanguard sent me a 1099B for 2011 and then a 2nd page which lists the long and short term losses on the mutual fund… I plugged this info into turbo tax… Do I still need to do the 8949? Thanks.

    • Kira Botkin

      Check the forms that Turbotax generates at the end – it probably did it for you.

  • Tony

    My wife and I have an exclusion of $500,000 from the sale of our home last year. How does that get reported on 8949 – as an adjustment in column g?

    • Kira Botkin

      Yes, that looks like the best route.

  • Stephen

    I use trademax finish my form 8949,you can try it

  • Trader2012

    Kira, how do you enter a transaction that is reported on 1099-B which has an incorrect cost basis AND it is a wash sale? Since only one code can be entered, how is this accomplished? And is this ultimately marked as a Category A or a Category C transaction?

    • Kira Botkin

      I would say it having an incorrect cost basis is more important, but including a note with your taxes to explain would help. And if you have a cost basis that was reported to the IRS and it’s on a 1099-B, sounds like it’s a category A even though the basis is not correct.

  • Serpa999

    For active traders, the transaction record could include hundreds of lines. Does it require to send in all the 8949 forms???

    • Kira Botkin

      Yes, you have to complete them fully – just because your taxes are complicated doesn’t mean you are allowed to not file them.

  • Shps1

    kira, When you list a wash gain in column g on 8949 does that make it a zero value, when adding up the other adjustments for loss? Thanks.

  • Drnsdad2

    Hi Kira, we have a stock that pays dividends each qtr, but instead of being reported on a 1099-div, it was reported on a 1099-b. When you look in the Details of the transactions, it shows a sale date but no acquisition date and the description is “return of principle” and there is nothing reported in the form of a cost basis. I have yet to figure out how to report this. Any suggestions?

    • Kira Botkin

      Here’s what the IRS has to say: Distributions that qualify as a return of capital are not dividends. A return of capital is a return of some or all of your investment in the stock of the company. A return of capital reduces the basis of your stock. For information on Basis of Assets, refer to Topic 703. A distribution generally qualifies as a return of capital if the corporation making the distribution does not have any accumulated or current year earnings and profits. Once the basis of your stock has been reduced to zero, any further non-dividend distribution is capital gain.

      So what I might do is to put the same amount for my basis as the amount they’re reporting as your dividend. Eventually, you’ll “run out” of basis and have to report the amounts as capital gains, because they’ll have “returned” the whole stock price to you. But, this would also depend on what the sale date was.

  • Ben Ragan

    Kira, I have a question about reporting capital gains for others and unfortunately its for the 2010 tax year. To clarify what I mean is – I made equal investments in a stock for both myself and a friend. Our basis’ (purchased in 2010) were the same and we sold assorted shares on the same days throughout the year.
    Upon final disposition I gave him an accounting and he reported the sales and capital gains on his own 2010 return (schedule D). I filed my 2010 return by Turbo Tax but unfortunately I reported both our sales and capital gains. In other words the IRS collected more than they were owed
    because I paid both his tax and mine….. stupid I know.
    Can you direct me to what form should have been filed to remove the gain from my responsibility and make it “reportable by others” I know an amended return needs to be filed but your answer will help me because we have a similar investment to report in 2011.

    Thanks, Ben

    • Kira Botkin

      This is a bit above my expertise level but I would think that sending your friend a 1099 would be a step in the right direction. I’d see if you can get some help from your broker or investment company that you purchased the stock through though.

  • IndiGuru

    Kira, Is there a way to download transactions into Quicken, export to excel and convert to 8949 format for IRS purposes? I could not directly import into TurboTax as I have more than 2800trans? Help!. Thx.

    • Kira Botkin

      You would need to contact Quicken to find that out.

  • Mary

    Hi Kira,
    I received a ring as a gift, I’ve had it for several years. I know I have to report it as long term – I sold it at a gain. It was bought for under 2K and I sold it for 5,600 – do I have to report the gain even though it was a gift to me from a grandparent and under 13,000?
    Thanks

    • Kira Botkin

      How much it was for is irrelevant – I assume you are getting $13,000 from the gift limit, which is neither here nor there. Any gain on personal property is supposed to be reported as a capital gain. The basis is the original amount it was purchased for.

  • Tcgraham5

    Hi Kira,
    my husband received assets from a UGMA act in 2011that his mom started for him many years ago. My husband sold the assets and thus received a 1099-B form which indicted that the basis is NOT reported to the IRS. Thus that mean that the total amount of proceeds is now taxable or how do we calculate the cost basis? Is it based on how much his mom contributed to the account throughout the years?

    • Kira Botkin

      The basis is the amount his mother put in – if these are shares of stock, the basis is what she bought them for. If it’s cash, etc, it’s the amount she originally invested minus all the growth over the years, and you should account for any reinvestments as well.

  • Metlife

    Hi Kira, I do my own taxes and I’m very meticulous, but it got me thinking that not all of us are like that. If you have a long term transaction reported on Form 1099-B, but basis NOT reported to the IRS … isn’t it possible that a person could put the incorrect amount in that basis box and if so, how does the IRS know that?

    • Kira Botkin

      They hope that the thought of an audit will put the fear of God in you and you will report everything correctly. =) Realistically, if you’re audited and you don’t have any documentation to prove what the basis is, they’ll probably declare you to have 0 basis and make you pay tax on the whole thing.

      • Metlife

        That answer makes sense Kira, but realistically what are the probabilities of an audit for the average person?

        • Kira Botkin

          The IRS audits about 1 to 2% of returns, but if you have certain red flags your chances of being audited are much greater, such as if you sell some stock that your grandfather bought 50 years ago whose basis is somehow only a few cents below what you sold it for.

  • Kwahiri

    I purchased stock with a friend. My investment was 75% of total invested. Used his brokerage account, I had transferred funds from my bank account to his brokerage account. Sold with significant capital loss. My friend will receive 1099 from his brokerage firm. Can I report 75% of capital loss on my tax return? Or is it that only he can report capital losses as stock purchased in his name?

    • Kira Botkin

      If it’s in his name, I’m kind of at a loss as to how you can prove to the IRS that it was really yours without quite a lot of paperwork. Did you have any documentation up front that he was purchasing this for you? Otherwise, all you’ve got documentation of is that you’re a very generous friend.

  • Semmy

    Hi Kira,
    I received stock as part of an employee benefit. When I received the stock, shares were withheld by my employer to account for taxes. I sold a number of shares this year and need to report my total cost–would the tax amount withheld be considered cost that I can include as part of the “Cost or other basis”?

    • Kira Botkin

      If you didn’t pay anything for the shares, then no, that is not a cost. I believe your basis in these shares would the amount that they were worth when they were given to you. This is an odd arrangement however – you can’t pay taxes with stock! You should find out whether your employer actually sent any money in to the IRS to cover this additional compensation (which is what free stock would be.)

      • Semmy

        Yes, the value of the shares was sent to the IRS at the time the shares vested. So I will not include taxes as cost/basis. New question–I received the same kind of stock a number of different times and each time it was at a different value. But when I cashed out stock, their value was irelevant–I was drawing from a pool of the same stock. How do I calculate a basis for such a mixed group? Do I use a weighted average of the values at time of vesting?

        • Kira Botkin

          The usual practice when the shares are all mixed together is to assume you sold the oldest ones first. So look back through the records and see what the values were for the oldest, then use those shares’ basis values.

  • Sine Nomine

    My total capital gain was only $48. Do I still have to fill out the lengthy Form 8949 for the 17 items reported by my brokerage? Gross Income is $55K.

    • Kira Botkin

      Your broker is going to send those 1099-B’s to the IRS, and if you don’t then report them on your taxes, the IRS is going to wonder why.

      • Sine Nomine

        Thank you, Kira. I know I have to report the $48 under Capital Gains, but just wondered if I had to fill out the complicated details (all transactions were under $100), for such a small result. As it turns out, I spent the hour or so to type everything in and the return is in the mail!

  • Clay

    Question on reporting Net Unrealized Appreciation (NUA). I received company stock from a 401(k) distribution as part of a rollover to an IRA. I subsequently sold the stock later in 2012 for a small profit above the NUA. It appears that I need to lines on the 8949 – one in Part I and one in Part II. For part I, I use the total proceeds value from the 1099B for the sales price and the sum of the cost basis and NUA from the 1099R for the Cost Basis. For Part II, I use the current market value at distribution from the 1099R for the Sales Price and the cost basis from the 1099B for the Cost Basis. Is this correct?

    Also, what do I put in the description box? For part I, I was thinking “nn shares of Stock after NUA applied” and for part II, “nn shares of Stock, NUA portion”.

    • Kira Botkin

      Yes, that sounds like a reasonable way to do it. The most important thing is to have a profit amount that matches whatever the brokerage is going to send in on your 1099B. You might want to write yourself a note and stick it in with your tax documents in case you’re ever called upon to explain the division.

  • Donn

    Hi Kira, I sold our main home and a 2nd home in 2012. I received 1099S on both transactions. the 2nd home was in AZ and the main home was in MS. 1st question: are the 1099S’s that I received from the title co handling the closing only sent to the IRS or are they also sent to the state where the home is located? 2nd question: The gain on the main home was excluded because of the $500,000.00 exemption and the 2nd home was sold at a loss. Both homes are reported on Form 8949 with the main home using Codes E&H in column f resulting in no gain ($0) reported in column h and the 2nd home using Codes E&L resulting in a non deductible loss ($0) reported in column h. If these are correct entries into form 8949, then $0 is carried over to Sch D, column h as a gain/loss. Can I use multiple codes in column f as each 1099S reported to the IRS gross proceeds in Box 2 requiring me to input the selling expenses as an adjustment to show the correct gain/loss for each transaction? Also, how do the states where the homes were sold know that these sales did not result in a taxable gain? And finally, if I have no taxable income in the states where I sold these homes am I required to file a return in these states?

    Thank you in advance for your answer as it looks like I will have to file my returns manually this year as both TaxAct and Turbo Tax handle the reporting of the sale of the 2nd home incorrectly as I understand the IRS instructions. Turbo Tax asks me to use net proceeds as the selling proceeds instead of the gross proceeds submitted on the 1099S which gives the correct entry on Sch D, but would probably generate a letter from the IRS. TaxAct does not allow for the use of multiple codes and using code L alone results in a capital gain as there is no way to enter the selling expenses. To get a correct entry in TaxAct form 8949 and Sch D, I have to impute a number into the cost basis (cost basis + selling expenses) . Neither TacAct or Turbo Tax were of any help in resoving this entry problem for the 2nd home. So if I do my tax return manually and mail it in the old way, I need your help to confirm my understanding of the above questions.

    Sorry for this long post, Thank you in advance for your time Donn

    • Kira Botkin

      This sounds like you should probably consult with a tax accountant who is familiar with home sales in your state. You could try using a separate form for each home, and then combining the totals. The states will be notified of the outcome of the sale when you file your state taxes.

  • thequeen7070

    What types of transactions would be reported that don’t have a 1099-B? What is the IRS looking for when (C) is selected?

    • Kira Botkin

      Most likely personal property, or other items where they’re hoping you’re going to be super honest about something they don’t know about.

  • jim

    Kira,
    The IRS instructions for Form 8949 state on page 2 that, “For 2012, instead of reporting each of your transactions on a separate row of Part I or Part II, you can report them on an attached statement containing all of the similar information…” It looks to me like the documents from my brokers provide those statements. Can those be attached to satisfy the reporting requirement?

    • Kira Botkin

      Yes, as long as they have all the info you need. Make sure you keep the originals.

  • TooEducatedToDoMyTaxes

    Author must be on drugs when writing this. A snap?!! The old way never caused my brain to be tied in knots the way this new 1099-B reporting is. It was so much simpler when I could figure my own basis based on my records of transactions. The broker has reported them all hacked up and I’m defeated by this form. Have to hire a tax preparer. This SUCKS!!

  • Tabby

    Kira, I owned a share in a mobile home park co-op. We sold the park (kept our homes as they will continue to operate). I paid $39,900 for my share and we recieved $69,000 when it was redeemed. This happened in the state of FLA and I am a Canadian. The law firm withheld 10% of the total amount paid ($6900). What do I have to do to get my withholding tax back?

  • Tammy

    I sold my house and received a 1099-s. can you help me?

  • drdhesq

    I have a return of capital listed on my 1099B, but the form does not say it is a return of capital. I believe it is not taxable, but how do I handle it on the 8949 form, or how do I tell the IRS that the gain is a return of capital?

  • Jerry

    I have a 1099B that shows both long term covered and uncovered securities. After the cost basis is performed both show capital gains. I understand both are to be reported on Form 8949, but what is the final number that gets put on the 1040 for tax purposes?

  • Lisa Huling

    My 1099-B has a line item that states Short Sale Date of Acquisition 12/23/13 Date of Sale 12/02/13 There are proceeds, but no cost basis. out to the side in small print it states “Not 1099 reportable”. What does this mean? Any help would be appreciated.

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