Learn how to report capital gains and losses from selling stocks, real estate, and crypto. Step-by-step guide covering IRS forms, exclusions, and tax-saving tips.
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Whether you're cashing out on a hot stock, selling your rental property, or finally parting ways with a vacation home, you’ll likely encounter capital gains taxes. But the process of reporting capital gains and losses can be confusing — especially with different tax treatments depending on the asset type, holding period, and your income level.
In this comprehensive guide, you’ll learn:
Capital gains occur when you sell an asset for more than you paid for it. On the flip side, if you sell it for less than your cost basis (original price plus certain adjustments), you have a capital loss.
Capital assets include:
Capital gains and losses are reported to the Internal Revenue Service (IRS) and can directly affect how much tax you owe.
The IRS separates capital gains into two categories depending on how long you’ve held the asset before selling:
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So, if you sell a stock after holding it for just 6 months, it’s a short-term gain and taxed at your regular income tax rate — which could be much higher than long-term capital gains rates.
Let’s walk through the steps:
This includes the purchase price plus commissions, fees, and improvements (for real estate). If you inherited an asset, the basis may be the fair market value (FMV) at the date of the original owner's death.
This is the gross sale price minus any selling expenses (like brokerage commissions, legal fees, or realtor commissions).
The difference between your cost basis and the net sale amount is your capital gain or loss.
Brokerages issue Form 1099-B by January 31st, listing all your stock and ETF sales for the year, including:
Report each stock or asset sale individually on Form 8949:
Schedule D summarizes all your transactions and carries totals to Form 1040, the main U.S. tax return.
Make sure your short- and long-term totals are accurate and match what your brokerage reported.
You may qualify for the Section 121 exclusion, which allows you to exclude up to:
To qualify:
Note: You still need to report the sale on Form 8949 or 1099-S, even if it’s fully excluded.
You don’t get the Section 121 exclusion. Instead:
Pro Tip: Keeping detailed records of improvements, repairs, and depreciation helps reduce your gain and tax liability.
If your investments didn’t go as planned, capital losses can actually help you:
Crypto is considered property by the IRS, not currency. That means every time you:
You must report a gain or loss.
Track these on Form 8949, just like stocks. Most investors use platforms like CoinTracker, Koinly, or TokenTax to stay organized.
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Here are some proven ways to reduce or defer your capital gains tax bill:
Doing so turns short-term gains into long-term, qualifying for lower rates.
Sell underperforming assets before year-end to offset gains.
Assets inside a Roth IRA, 401(k), or Traditional IRA grow tax-deferred (or tax-free in Roths).
If you’re planning to sell your home, meet the 2-out-of-5-year rule to exclude gains.
Spread capital gains over several years by structuring your real estate sale as installment payments.
You may avoid capital gains entirely and receive a charitable deduction if you donate appreciated stocks or crypto to a qualified charity.
If you:
…it may be time to call in a CPA, tax advisor, or enrolled agent (EA). Tax professionals can help you avoid costly mistakes, maximize deductions, and develop a personalized strategy.
Whether you sold a few shares of stock or cashed out on a rental property, understanding how to report capital gains and losses is key to staying IRS-compliant and reducing your tax bill.
Steps Recap:
And don’t forget: Losses count too. Use them to your advantage!
Whether you're dealing with complex stock trades, selling investment property, or figuring out crypto taxes, the experts at Vincere Tax are here to guide you.
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To calculate your capital gain or loss on stocks, subtract your cost basis (what you paid for the stock including fees) from the sale price (what you received after selling, minus transaction fees). If the result is positive, it’s a capital gain; if negative, it’s a capital loss.
Not always. You may exclude up to $250,000 of capital gains from the sale of your primary residence if you’re single, or $500,000 if married filing jointly, as long as you’ve owned and lived in the home for at least two of the last five years.
Short-term capital gains come from assets held for one year or less and are taxed at your ordinary income tax rate. Long-term capital gains, from assets held more than one year, are taxed at a lower rate (0%, 15%, or 20%) depending on your income.
Yes. You can use capital losses to offset capital gains dollar for dollar. If your losses exceed your gains, you can deduct up to $3,000 ($1,500 if married filing separately) from other income. Unused losses can be carried forward to future years.
Yes. Reinvesting the proceeds from a sale does not exempt you from reporting the capital gain. The IRS still considers it a taxable event, and you must report the gain or loss on your return.
Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!
This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.
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