You will need a Schedule D form to report your capital gains and losses.
Capital gains and losses are the amounts of money that you have made or lost on your investments. Capital gains are taxed by the government, and you can use a capital loss of up to $3,000 as a deduction on your tax return. The rate at which capital gains are taxed depends on how long the investment assets were held. For instance, a long-term capital gain is taxed at 15 percent and is applicable for investments that were held for more than a year. A short-term capital gain is taxed at your normal income tax rate and is applicable to investments that you held for less than a year. You do not have to report capital gains or losses on your taxes until they are realized, meaning that you have sold the assets.
Instructions
1. Tally your long-term capital gains and losses for the year. Add up your gains and losses from stocks or bonds that you sold and that you had held for over a year. For instance, suppose that you sold your long-term stock portfolio and netted a $5,000 gain.
2. Tally your short-term capital gains and losses for the year. Add up your gains and losses from stocks or bonds that you sold and that you had held for less than a year. For instance, suppose that you sold your short-term stock portfolio and netted a $3,000 gain.
3. Multiply your long-term capital gains by 0.15 and your short-term capital gains by your current income tax rate and add the results together to determine the amount you owe in capital gains taxes. For example, if you are in the 28 percent income tax bracket:
Taxes owed = 0.15 x $5,000 + 0.28 x $3,000 = $1,590
4. Fill out IRS Form 1040 (Schedule D) with the information from your investment transactions. You will have to detail each asset you bought and sold, its value, and the dates of the transactions. There is a line on the form where you will put the total capital gains taxes owed. Also, know that if your investment transactions exceed in number the available lines on the form, you will have to attach a supplemental sheet with the rest of your transactions.
