What this line means
Your net capital gain or loss from selling stocks, bonds, mutual funds, real estate, or other capital assets. This amount comes from Schedule D line 21, or directly from Form 8949 if Schedule D is not required. Gains increase your income; losses reduce it, up to a $3,000 deduction per year against ordinary income.
Does this apply to you?
- You sold stocks, bonds, mutual funds, or ETFs during the year
- You sold real estate other than your primary home (or sold your home for a gain exceeding the exclusion)
- You received capital gain distributions from mutual funds (reported on 1099-DIV Box 2a)
- You sold collectibles, precious metals, or other capital assets
- You are carrying forward a capital loss from a prior year
Easy to overlook
Stepped-up basis on inherited assets When you inherit stocks, property, or other assets, your cost basis is the fair market value on the date of the decedent’s death — not what they originally paid. Seniors who inherited assets from a spouse or parent and later sold them frequently use the original purchase price as their basis, overstating the gain. The stepped-up basis often eliminates or substantially reduces the taxable gain. 1 IRS Publication 550 — Investment Income and Expenses
Capital loss carryforward from prior years If you had net capital losses exceeding $3,000 in any prior year, the excess carries forward indefinitely. Retirees who stopped filing Schedule D after a bad investment year sometimes forget accumulated carryforward losses that could offset current-year gains. Check line 6 of your prior-year Schedule D for any carryforward amount. 2 General filing pattern — cost basis errors on inherited assets
Watch out for this
Relying on the cost basis reported by your broker on Form 1099-B without verifying it. Brokers are required to report cost basis only for shares acquired after specific dates (2011 for stocks, 2012 for mutual funds, 2014 for bonds). For assets held longer than that — common among seniors with long-held positions — the broker may report the basis as zero or leave it blank, overstating your gain.
Footnotes
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IRS Publication 550, Investment Income and Expenses, Basis of Investment Property. https://www.irs.gov/pub/irs-pdf/p550.pdf ↩
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IRS Schedule D Instructions, Capital Loss Carryover Worksheet. https://www.irs.gov/instructions/i1040sd ↩