Schedule D
Schedule D: Capital Gains and Losses (Line 7)
Schedule D — 2025 Form 1040, Line 7 — reports capital gains and losses flowing from Form 8949: short vs. long holding periods, wash sales under §1091, the $3,000 loss limit, and carryforward of the rest.
How sales flow: 8949 to D to Line 7
Each sale of stock, securities, or other capital assets starts on Form 8949, where you report proceeds, basis, and dates from your 1099-B. Totals carry to Schedule D, which nets short-term against long-term, and the bottom line lands on Form 1040, Line 7. Long-term gains — assets held more than one year — get the preferential 0/15/20% rates under §1(h); short-term gains are taxed as ordinary income.
Wash sales can erase a loss
Under §1091, a loss is disallowed when you buy substantially identical stock or securities within 30 days before or after the sale — the wash-sale window. The disallowed loss is not gone forever: it adjusts the basis of the replacement shares, so you recover it when those shares are sold. Year-end tax-loss harvesting fails when an automatic dividend reinvestment or a quick repurchase trips the rule unnoticed.
The $3,000 limit and carryforward
Net capital losses offset ordinary income up to $3,000 per year ($1,500 if married filing separately). The excess carries forward indefinitely until it is used up — track it year to year or it quietly vanishes from your return. For the full income-reporting walkthrough, see Chapter 2: Income.
Questions, answered
- What is the difference between short-term and long-term?
- Hold the asset more than one year and the gain is long-term, taxed at the preferential 0/15/20% rates under §1(h). One year or less is short-term, taxed as ordinary income.
- What is a wash sale?
- Under §1091, a loss on a sale is disallowed when you buy substantially identical stock or securities 30 days before or after the sale. The disallowed loss adjusts the replacement shares’ basis.
- How much capital loss can I deduct each year?
- Net capital losses offset ordinary income up to $3,000 per year ($1,500 if married filing separately). The excess carries forward indefinitely until used up.
Keep reading: Dividends · Total Income · Schedule E Rental