How to Report Capital Gains

Income produced as a result of the sale of a capital asset must be reported on your income taxes as a capital gain. The amount of the reported capital gains depends on how long you have held the asset, the original purchase price, sale price and your income tax bracket. Here are some steps to take to ensure that your capital gains are reported accurately to the IRS.

Difficulty: Moderate

Instructions

Things You'll Need:

• IRS Form 1040 Schedule D
• IRS Form 1040 Schedule C
• IRS Form 1040 Schedule F
• IRS Form 1065
• IRS Form 1120
• IRS Form 1120-S

1. Use Form 1040, Schedule D to report a capital gain from the sale of financial instruments such as stocks, bonds and mutual funds.

2. Get Form 1040 Schedule D if you have earned a capital gain as a result of selling private property such as jewelry, furniture, cars, art collections and any thing else that you previously held for personal use only.

3. Report your capital gains if you have sold land. Capital gains from property purchased for investment purposes must be reported on Form 1040, Schedule D.

4. Fill out Form 1040, Schedule C to report a capital gain if you are self-employed and received additional income because of the sale of a capital gain from normal business transactions.

5. Complete Form 1040, Schedule F if you are a farmer and have sold property, plant and/or equipment.

6. Submit Form 1065 with your tax return to report capital gains if you are a part of a partnership.

7. Send in IRS forms 1120 and 1120-S to report capital gains for a corporation.

Tips & Warnings

• When reporting short-term capital gains, complete Part One of Form 1040 Schedule D. If you have held the property for less than 12 months before it is sold, the profit from the sale is considered a short-term capital gain.
• When reporting long-term capital gains, complete Part Two of Form 1040 Schedule D. If you have held the property for more than 12 months before it is sold, the profit from the sale is considered a long-term capital gain.
• If your taxes are complicated, hire an accountant to be sure that they are being filed properly.

Resources

• Read more about capital gains and losses.
• Learn about capital gains tax policies at the Tax Policy Center.