If you’ve sold stocks, bonds, cryptocurrency, real estate, or other types of investments within the past tax year, you may be required to report those transactions on IRS Form 8949. This tax form plays a critical role in accurately reporting capital gains and losses on your federal tax return and must be filed in conjunction with Schedule D. For many investors, understanding this form and when to use it can eliminate the risk of costly errors and potential issues with the IRS.
We explain the purpose of Form 8949, who needs to file it, what kind of information it includes, and how it fits into the broader process of reporting investment income. Whether you’re a first-time investor or a seasoned trader, having a clear understanding of Form 8949 is essential for proper tax compliance.
What Is IRS Form 8949 Used For
Form 8949 is officially titled Sales and Other Dispositions of Capital Assets. It is used to report the sale or exchange of capital assets, such as stocks, mutual funds, exchange-traded funds, real estate, collectibles, and digital currencies like Bitcoin or Ethereum. Any time you sell one of these assets, you may experience a capital gain or a capital loss, both of which must be reported to the IRS.
The IRS uses this form to understand the details of each transaction, including the date you acquired the asset, the date you sold it, the sale price, your original cost, and any applicable adjustments. These details are necessary to calculate the correct capital gain or loss. Each transaction is reported individually on Form 8949 unless you are eligible to attach a consolidated statement instead.
If you’re wondering why these details matter, it’s because capital gains are taxed differently depending on how long you held the asset. Short-term gains, resulting from assets held for one year or less, are taxed as ordinary income. Long-term gains, from assets held for more than a year, receive preferential tax treatment and are generally taxed at lower rates.
The Role of Schedule D
While Form 8949 is where individual asset transactions are reported, Schedule D of IRS Form 1040 is where you summarize all capital gains and losses for the tax year. In effect, Form 8949 provides the backup details, and Schedule D delivers the total net gain or loss.
On Schedule D, you also report capital loss carryovers from previous tax years, which can offset current gains. If your losses exceed your gains, you may be able to deduct up to $3,000 from your ordinary income. Any remaining loss can be carried forward to future tax years.
Form 8949 and Schedule D work together to ensure that the IRS receives both the line-by-line breakdown and the consolidated figures needed to assess your capital gains tax liability.
When You Are Required to File Form 8949
Not everyone who receives a 1099-B from a broker is automatically required to file Form 8949. Whether you must include this form with your return depends on the type of transaction and how the cost basis was reported.
You must file Form 8949 if any of the following situations apply:
- You sold stocks, ETFs, or mutual funds and the cost basis was not reported to the IRS on Form 1099-B.
- You sold property such as real estate or collectibles.
- You had cryptocurrency transactions during the year, even if you used crypto to purchase goods or services.
- You experienced a wash sale, and part of your loss is disallowed.
- You are correcting the cost basis because the broker reported it incorrectly.
- You are reporting a non-business bad debt as a capital loss.
If your Form 1099-B does report the cost basis and there are no adjustments, you may be able to report summary totals directly on Schedule D without filing Form 8949. However, most taxpayers with investment activity involving adjustments must complete Form 8949.
Understanding Capital Assets
A capital asset is essentially any asset held for personal or investment purposes. This includes stocks, bonds, mutual funds, options, digital assets, and real estate. Even a car or home can be considered a capital asset if sold under certain conditions.
Capital gains or losses arise when the asset is sold or exchanged. The gain or loss is calculated as the difference between the selling price (proceeds) and the cost basis. For securities and crypto, cost basis typically includes the purchase price and any commissions or fees paid.
Different rules apply depending on how the asset was acquired. For example, inherited property usually has a stepped-up basis, while gifts retain the donor’s basis. Properly understanding and documenting the cost basis is essential to correctly completing Form 8949.
Importance of Cost Basis in Reporting
Cost basis is one of the most important pieces of information when filling out Form 8949. It represents the original value of an asset, adjusted as needed for events such as stock splits, reinvested dividends, or disallowed losses. Brokers may or may not provide your basis on Form 1099-B, depending on when the asset was acquired.
If the cost basis is incorrect or missing, you must determine it yourself using your transaction history. If you report an incorrect basis, the IRS may believe your gain or loss is greater than it truly is, leading to an inflated tax bill or potential penalties.
Many taxpayers forget to include brokerage commissions or fees in their basis, which can lead to overpaying capital gains tax. Form 8949 allows you to adjust the reported basis using specific codes to reflect a more accurate figure.
Cryptocurrency and IRS Form 8949
Since digital currencies are classified as property, not currency, all sales or uses of cryptocurrency may result in a capital gain or loss. That means every transaction — whether you exchanged crypto for dollars, traded one coin for another, or used crypto to buy a product — is taxable and reportable.
If you bought Bitcoin for $8,000 and later used it to purchase a car when its value had risen to $12,000, the $4,000 difference is considered a capital gain. Similarly, if the value had dropped, it could result in a capital loss.
The IRS requires you to maintain thorough records of every crypto transaction. Many exchanges do not issue Form 1099-B, which means you must track acquisition dates, purchase prices, sale dates, and market values yourself. All this information will be reported on Form 8949, with totals flowing into Schedule D.
What Is a Wash Sale
A wash sale occurs when you sell a security at a loss and then repurchase the same or a substantially identical security within 30 days before or after the sale. The IRS disallows the loss from a wash sale, meaning it cannot be deducted on your return for that tax year.
Instead, the disallowed loss is added to the cost basis of the new security you purchased, deferring the loss until that asset is sold. This rule is intended to prevent taxpayers from selling at a loss simply to claim a deduction while maintaining their investment position.
On Form 8949, you must adjust for wash sales using adjustment code W. The disallowed amount must be reflected in column G of the form. Proper handling of wash sales is critical, especially for frequent traders or anyone using an automated investing platform.
How Brokers Report Transactions
Most brokers are required to send Form 1099-B to both you and the IRS if you’ve sold securities. This form includes key information such as:
- Description of the asset
- Dates acquired and sold
- Gross proceeds
- Cost basis (if known)
- Whether the gain or loss is short-term or long-term
However, brokers may not have accurate or complete data on your cost basis, especially if the asset was transferred from another account or if it was purchased before broker reporting rules changed. In such cases, you must adjust or supply the missing information on Form 8949.
If you received a consolidated 1099 statement with summaries, it’s still your responsibility to ensure that the transaction-level data is accurate and complete, particularly for assets requiring adjustments.
Categories and Checkboxes on Form 8949
Form 8949 separates transactions into categories depending on the type of gain or loss and how the broker reported the information to the IRS. These are divided into short-term and long-term sections.
For short-term transactions:
- Box A: Reported on 1099-B with basis reported to the IRS
- Box B: Reported on 1099-B without basis reported to the IRS
- Box C: Not reported on 1099-B
For long-term transactions:
- Box D: Reported on 1099-B with basis reported to the IRS
- Box E: Reported on 1099-B without basis reported to the IRS
- Box F: Not reported on 1099-B
Selecting the correct category ensures that the IRS interprets your figures correctly. Each group of transactions with the same category goes on a separate page of Form 8949.
Key Sections of Form 8949
IRS Form 8949 is divided into two main parts:
- Part I: For short-term transactions, covering assets held for one year or less
- Part II: For long-term transactions, covering assets held for more than one year
Within each part, taxpayers must further separate transactions based on how they were reported to the IRS by their broker or exchange, if at all. For example, transactions with cost basis reported on Form 1099-B go in a different category than those without basis reported.
Understanding the Categories and Checkboxes
Each section of Form 8949 includes three checkboxes to distinguish between the ways transactions were reported:
Short-term (Part I):
- Box A: Proceeds and basis reported on Form 1099-B
- Box B: Proceeds reported on Form 1099-B, but basis not reported
- Box C: No Form 1099-B received
Long-term (Part II):
- Box D: Proceeds and basis reported on Form 1099-B
- Box E: Proceeds reported on Form 1099-B, but basis not reported
- Box F: No Form 1099-B received
Each category requires a separate page of Form 8949. If you have transactions in more than one category, you will complete multiple copies of the form and check the relevant box at the top of each.
Gathering Required Documentation
Before filling out the form, collect all necessary records for each sale or disposition. These may include:
- Form 1099-B from your brokerage
- Crypto transaction history reports from digital asset exchanges
- Real estate sale documents
- Cost basis records, such as trade confirmations and purchase statements
- Documentation of any adjustments (e.g., wash sales, incorrect basis)
Ensure that every transaction is supported by detailed records. You will need to know the purchase date, sale date, sale proceeds, original purchase price (cost basis), and any fees or commissions paid.
Step-by-Step Guide to Completing Form 8949
Each transaction reported on IRS Form 8949 requires seven pieces of information, entered across seven columns (A through G). The form provides one line per transaction.
Step 1: Fill in Column A – Description of Property
In Column A, describe the asset you sold. This can include a quantity and name of the security, such as:
- 50 shares of ABC Corp
- 2 BTC (Bitcoin)
- 1 rental property located at 123 Main Street
Keep descriptions clear but concise. The IRS does not require detailed identifying numbers, but the entry should provide enough context to verify the transaction against supporting documents.
Step 2: Fill in Column B – Date Acquired
Enter the date you acquired the asset. If you acquired the same type of asset on different dates (e.g., through multiple stock purchases), you can list each lot separately or aggregate them if applicable. For inherited assets, use the date of death of the decedent as the acquisition date.
If you don’t know the exact date of acquisition, use a reasonable estimate based on your records. For digital currency, use blockchain history or wallet export data.
Step 3: Fill in Column C – Date Sold or Disposed
In Column C, enter the date the asset was sold or disposed of. This is usually listed on your brokerage statement or Form 1099-B. For crypto, the date corresponds to when the transaction occurred on the blockchain. For real estate, use the closing date listed on the settlement statement.
Step 4: Fill in Column D – Proceeds (Sales Price)
Column D requires the gross proceeds from the sale. This includes the total amount you received before deducting any fees or commissions, unless the broker already netted those out.
For stocks, the brokerage typically lists proceeds on Form 1099-B. For crypto, the proceeds equal the fair market value at the time of the sale or transaction. If you used crypto to buy a product, the price of the product is considered the proceeds.
Step 5: Fill in Column E – Cost or Other Basis
Column E is where you enter the original cost or adjusted basis of the asset. This usually includes the purchase price plus any commissions, fees, or other expenses.
If the cost basis was reported incorrectly or not at all on Form 1099-B, you must enter the corrected figure. For crypto, determine the cost basis based on the method you use (FIFO, LIFO, or specific identification) and maintain consistent use throughout your reporting.
For inherited property, the cost basis is generally the fair market value on the date of the original owner’s death. For gifted assets, the donor’s cost basis usually applies.
Step 6: Fill in Column F – Adjustments, if Any
If there’s an adjustment to the gain or loss, such as a wash sale disallowance or a correction to cost basis, enter a code in Column F. Common adjustment codes include:
- W: Wash sale disallowed loss
- B: Basis is incorrect on Form 1099-B
- T: Correcting basis and the transaction was reported to the IRS
Use only one code per line unless multiple adjustments apply. In that case, you may combine codes or separate the transaction across multiple entries.
Step 7: Fill in Column G – Adjustment Amount
Column G is used to enter the adjustment amount. If you adjusted the gain or loss due to a disallowed wash sale, enter the amount of the loss that is disallowed as a positive number. If you are correcting a basis that was reported incorrectly, calculate the difference between the incorrect and correct basis and enter the adjustment here.
The adjustment is applied to the gain or loss. A positive number reduces a loss or increases a gain. A negative number increases a loss or reduces a gain.
Example of a Stock Transaction
Consider the following example:
- You sold 100 shares of ABC Corp on June 15 for $5,000.
- You originally purchased them on January 10 for $3,500.
- You paid a $50 brokerage fee at purchase and another $50 at the sale.
- The transaction was reported on Form 1099-B, including basis and proceeds.
The entry would be:
- Column A: 100 shares of ABC Corp
- Column B: 01/10/2023
- Column C: 06/15/2023
- Column D: 5000
- Column E: 3550
- Column F: Leave blank
- Column G: Leave blank
This transaction results in a $1,450 gain, which will be calculated and totaled at the bottom of the form.
Example of a Wash Sale Adjustment
Now assume you sold 200 shares of XYZ Inc. on December 5 for $4,000, but repurchased 200 identical shares two days later. You originally paid $4,800 for the shares, resulting in an $800 loss, but the wash sale rule disallows this loss.
The entry would be:
- Column A: 200 shares of XYZ Inc.
- Column B: 06/20/2023
- Column C: 12/05/2023
- Column D: 4000
- Column E: 4800
- Column F: W
- Column G: 800
Because of the adjustment, the loss cannot be deducted this year but is carried over in the new lot’s cost basis.
Totaling Each Category
Once you complete all transaction entries for a specific category (e.g., all short-term transactions with basis reported), total the columns:
- Add all amounts in Column D for total proceeds
- Add all amounts in Column E for total basis
- Add all values in Column G for total adjustments
Then calculate the overall gain or loss by subtracting basis and adjustments from the proceeds. This total will be carried to Schedule D for tax calculation.
When to Attach Supporting Statements
If you have too many transactions to list individually, or if you use software or your broker provides a formatted Form 8949 substitute, you can enter summary totals for each category and attach the full statement as a PDF or printout when filing your return.
However, you must still categorize each summary by the applicable checkboxes and part of the form, ensuring the IRS can match totals to supporting data.
Filing Form 8949 With Your Tax Return
IRS Form 8949 is not a standalone document. It must be filed alongside your Form 1040 and Schedule D. If you’re filing your return electronically, Form 8949 is submitted as part of your digital return package. If you’re filing by mail, printed copies of Form 8949 and supporting documents must be included with your tax return.
When filing, be sure that:
- All transaction details on Form 8949 align with the summaries on Schedule D
- Each category of transaction (based on checkbox A-F) is reported on a separate page
- Supporting documentation is provided, especially for large-volume investors or when using summary reporting
- All totals from Form 8949 are accurately carried over to Schedule D lines 1a–1c and 8a–8c
If you are reporting gains and losses from more than one brokerage, exchange, or wallet, you may have several different Forms 1099-B or CSV transaction exports. These should be organized by reporting category before you begin inputting them into the proper sections of Form 8949.
E-Filing vs. Paper Filing
Today, most taxpayers choose to file electronically due to the speed, convenience, and accuracy of digital submissions. Electronic filing allows integration with brokerage platforms, reduces calculation errors, and ensures faster processing by the IRS. Most major tax software solutions allow you to complete and submit Form 8949 electronically, along with Form 1040 and Schedule D.
Paper filing is still accepted by the IRS, but it requires careful formatting. You must print and attach all applicable Forms 8949, Schedule D, and your Form 1040. If you’re using consolidated 1099s or attaching a spreadsheet or substitute statement in lieu of listing transactions line-by-line, these supporting schedules must be included with your paper return.
When mailing, use the correct IRS address for your state and tax situation, and keep a copy of everything for your records. If you are including adjusted cost basis or disallowed losses (e.g., from a wash sale), be sure that adjustments are clearly explained on the form.
Reporting Summary Totals Using Attached Statements
For taxpayers with dozens or even hundreds of transactions, listing each one individually on IRS Form 8949 may not be practical. The IRS allows you to submit summary totals for each reporting category, provided you attach a detailed statement that includes all required transaction-level information.
To use this option:
- Separate your transactions into categories (e.g., short-term reported on Form 1099-B with basis, long-term not reported on Form 1099-B)
- Prepare or obtain a spreadsheet or PDF that lists each transaction with acquisition date, sale date, proceeds, cost basis, and any adjustments
- Enter the summary total for each category on Form 8949
- Check the box indicating that a statement is attached and submit it along with your return
This approach is often used by active traders or cryptocurrency investors with high transaction volume. If you’re using brokerage software or crypto portfolio management tools, they may provide a statement in IRS-compliant format.
Using Tax Software to Automate Form 8949
Most modern tax software solutions support automated handling of capital gains reporting and include features to complete Form 8949 with little manual effort. Here’s how the process generally works:
Import From Your Brokerage
Many tax preparation platforms allow you to import Forms 1099-B directly from supported brokerages. After linking your account or uploading a digital statement, the software parses each transaction and places it in the appropriate part of Form 8949. This reduces data entry and helps prevent manual errors.
When importing, ensure that:
- All transactions are categorized correctly as short-term or long-term
- Basis is properly reported or adjusted if missing
- Any wash sale flags are included and appropriately carried over
Upload a CSV or TXF File
If your brokerage or exchange doesn’t support direct integration, most tax platforms allow you to upload a file instead. Common formats include CSV and TXF, both of which contain transaction data. Before uploading, confirm the file is formatted according to the software’s specifications, with clear column headers and proper date formats.
This is particularly useful for digital assets, as many crypto exchanges export trade histories in CSV format. You can also use third-party crypto tax tools to generate Form 8949-ready reports that consolidate transactions across multiple wallets or exchanges.
Manual Entry
If you only have a handful of sales or exchanges, manual entry may be the simplest solution. Enter each transaction line-by-line into the software’s capital gains reporting section. Most platforms will automatically calculate gains and losses and generate the proper Form 8949 summary and detail pages.
Manual entry also allows you to flag wash sales or correct cost basis errors, ensuring accuracy. However, this method can be time-consuming if you have multiple accounts or frequent trades.
Common Mistakes to Avoid When Filing Form 8949
Taxpayers often make errors when reporting capital gains, particularly with Form 8949. Here are some of the most common issues and how to prevent them.
Failing to Report All Transactions
Even if you did not receive a Form 1099-B for a particular sale — such as selling cryptocurrency or collectibles — the transaction must still be reported. The IRS expects you to report all capital asset sales, whether or not a broker was involved.
If you received no official tax forms, maintain your own transaction records and use them to complete Form 8949 manually or with software support.
Using Incorrect Cost Basis
An incorrect cost basis leads to inaccurate gains or losses, which may cause you to pay too much or too little tax. Common cost basis errors include:
- Failing to include reinvested dividends
- Using the wrong lot when calculating sale cost
- Ignoring transaction fees or brokerage commissions
- Misapplying inherited or gifted basis rules
If you’re correcting a basis that was reported incorrectly on Form 1099-B, make sure to include the appropriate adjustment code on Form 8949.
Ignoring Wash Sale Adjustments
Wash sales are a frequent source of confusion. If you sell a security at a loss and buy a substantially identical one within a 30-day window, the IRS disallows that loss for the current year. Many taxpayers forget to apply the wash sale adjustment or fail to report the disallowed amount properly using code W on Form 8949.
Wash sale adjustments increase the cost basis of the replacement shares, which must be tracked for future reporting. Failing to report this adjustment can distort your long-term gain or loss figures.
Not Separating Transaction Categories
Form 8949 requires you to separate short-term and long-term transactions and further split them by reporting status. Mixing categories can result in mismatches with IRS records and increase the risk of audit or correction notices.
Always check the top box on each page of Form 8949 to indicate which category the page includes, and never combine different types of transactions on the same page.
Misreporting Cryptocurrency Transactions
Because cryptocurrency is considered property, each use or sale can trigger a gain or loss. Many taxpayers incorrectly assume that crypto-to-crypto exchanges or using crypto to purchase goods is not taxable.
In fact, every crypto disposal is a reportable transaction. You must calculate the fair market value of the asset at the time of sale or exchange and compare it to your cost basis to determine the gain or loss. Ensure each crypto trade is properly documented and entered on Form 8949.
When to Use Adjustment Codes
IRS Form 8949 includes a column for adjustment codes that explain changes made to the reported cost basis or proceeds. Common codes include:
- W: Wash sale loss disallowed
- B: Basis was not reported correctly by the broker
- T: Both basis and sale were reported, but adjustments were made
Each transaction that includes an adjustment must have the code entered in Column F, with the corresponding dollar value shown in Column G. If more than one code applies, you may need to split the transaction into multiple lines or provide a detailed explanation with your return.
Special Considerations for High-Volume Traders
Traders who execute hundreds or thousands of trades each year may find Form 8949 especially burdensome. The IRS allows summary reporting for such cases, but the underlying data must still be documented and available upon request.
If you qualify as a trader in securities and use mark-to-market accounting under Section 475(f), you are generally not required to use Form 8949 for trades subject to that method. Instead, your gains and losses are reported directly as ordinary income on Form 4797. This special status must be elected with the IRS in advance.
For everyone else, clear recordkeeping and proper categorization of transactions are essential. Use automation wherever possible, and review brokerage summaries for completeness before filing.
Organizing Your Tax Filing
When preparing your return, keep the following documents and schedules organized and ready to submit:
- IRS Form 8949 (separate pages for each reporting category)
- Schedule D with totals carried from Form 8949
- Form 1040 as the primary return
- Copies of all Forms 1099-B and 1099-K
- Summary statements or transaction lists (if used)
- Backup for any adjustments made to basis or proceeds
Be sure that totals on Form 8949 match those on Schedule D and that any discrepancies are clearly explained. The IRS matches data from brokers with what you submit, so inconsistencies may lead to questions or adjustment notices.
Conclusion
Reporting capital gains and losses correctly is a vital part of fulfilling your tax obligations, especially if you’ve sold investments like stocks, cryptocurrency, real estate, or other capital assets during the year. IRS Form 8949 is the cornerstone of this process, providing the IRS with a detailed, transaction-level breakdown of every sale or exchange of property. It helps ensure that your taxable gains and deductible losses are calculated accurately.
Throughout this guide, we’ve explored the full scope of how Form 8949 works from understanding its purpose and structure, to correctly categorizing and documenting your transactions, to integrating it with Schedule D. Whether you’re reporting a handful of stock sales or hundreds of crypto trades, knowing how to separate short- and long-term gains, apply adjustment codes like wash sales, and accurately calculate cost basis can significantly reduce errors and potential penalties.
Today’s tax environment increasingly relies on accurate digital reporting, and tax software plays a crucial role in simplifying Form 8949. Importing brokerage data, attaching transaction summaries, or manually entering sale information are all options that help streamline the filing process. Regardless of how you prepare your return, maintaining meticulous records and understanding the rules that apply to each type of investment is critical.
Tax law surrounding capital gains is nuanced and evolves regularly. Staying informed about these changes, especially those related to digital assets and wash sale rules, ensures that you report income properly and make the most of any available deductions. With a solid grasp of Form 8949 and its connection to Schedule D, you’ll be well-equipped to navigate tax season with clarity and confidence.
If your financial life involves regular investing, trading, or selling personal property, treating Form 8949 with care is not just about compliance, it’s about protecting your financial integrity and avoiding costly mistakes down the line.