Tax Forms for Sale of Property: 8949, Schedule D, and 4797

When you sell property in the United States, the main sale of property tax form is Form 8949, which feeds into Schedule D of your Form 1040. That covers most sellers. Rental or business property sales add Form 4797. Seller-financed deals use Form 6252. Like-kind exchanges go on Form 8824, and high earners may also file Form 8960 for the 3.8% net investment income tax. Which combination you need depends on the type of property, how long you owned it, and whether an exclusion or deferral applies.

Which Form to Use for Which Sale

Start by matching your situation to the right form:

Personal home or other personal-use property: Form 8949 and Schedule D. If your gain is fully excluded under Section 121 and you did not receive a Form 1099-S, you don’t have to report the sale at all.
Rental or business real estate: Form 4797, plus Form 8949 and Schedule D for any remaining capital gain portion.
Seller-financed sale with at least one payment received in a later year: Form 6252, with the annual taxable portion flowing to Schedule D.
Like-kind exchange of investment or business real property: Form 8824.
Buyer purchasing from a foreign seller: Form 8288 and Form 8288-A for FIRPTA withholding.
Any seller whose income exceeds the NIIT thresholds: Form 8960 in addition to the forms above.

These are not mutually exclusive. A landlord who sells a rental for a gain, for example, typically files Form 4797, Schedule D, and possibly Form 8960 all with the same return.

How to Fill Out Form 8949 and Schedule D

Form 8949 is where you list the transaction itself: the date you acquired the property, the date you sold it, the sales proceeds, and your adjusted basis. The closing agent typically sends you Form 1099-S reporting the gross proceeds, and that figure goes in Column (d).¹

The form splits into two parts. Part I is for short-term transactions where you held the property one year or less. Part II is for long-term transactions where you held it more than one year.¹ Most real estate lands in Part II.

Totals from Form 8949 carry to Schedule D, which combines every capital transaction for the year.² Schedule D produces the net figure that lands on your Form 1040. Short-term gains are taxed at ordinary rates up to 37%; long-term gains at 0%, 15%, or 20% depending on your taxable income. If you’re near the one-year mark, waiting a few days to close can shift the whole gain to the lower long-term rate.

Losses on personal-use property, including your home, are not deductible.³ Only losses on investment or business property can offset other income, and even then the deduction against ordinary income is capped at $3,000 per year ($1,500 if married filing separately), with the rest carried forward.⁴

Figuring the Gain or Loss That Goes on the Form

Every property sale comes down to one subtraction: amount realized minus adjusted basis. You need three numbers.

Your Basis

Your basis usually starts with what you paid, plus certain settlement costs like legal fees, recording fees, title search charges, and owner’s title insurance. Loan-related charges (mortgage points, lender-required appraisal fees, mortgage insurance premiums), casualty insurance, escrow deposits for future taxes, and pre-closing rent do not get added to basis.⁵

Inherited property is different. Your basis is generally the fair market value on the date the previous owner died, not what they originally paid.⁶ This stepped-up basis often shrinks the taxable gain dramatically when heirs sell.

From the starting basis, calculate the adjusted basis. Add capital improvements that extended the property’s useful life or added value, like a new roof, central air, or a room addition. Subtract any depreciation you claimed or could have claimed while renting it out or using it in a business.⁵ Routine repairs and maintenance don’t count as improvements.

Your Amount Realized

Amount realized is the gross selling price minus selling expenses: real estate commissions, advertising, legal fees, transfer taxes, stamp taxes paid by the seller.⁷ A $500,000 sale with $30,000 in commissions and closing costs gives an amount realized of $470,000.

Amount realized minus adjusted basis is your gain or loss. That’s the number that ends up on the form.

Reporting a Home Sale With the Section 121 Exclusion

Sellers of a primary residence can exclude up to $250,000 of gain, or up to $500,000 for married couples filing jointly, under Section 121 of the Internal Revenue Code. To qualify for the full exclusion, during the five-year period ending on the sale date you must have owned the home for at least two years and lived in it as your main home for at least two years. Those two periods don’t need to overlap. For the joint $500,000 amount, either spouse can meet the ownership test but both must meet the use test, and neither can have claimed the exclusion on another sale in the prior two years.⁸

Sell before hitting two years and you may still get a prorated partial exclusion if the reason was a qualifying job relocation (new workplace at least 50 miles farther than the old one), a health condition, or an unforeseeable event like a home’s destruction, divorce, or job loss.⁷

If your entire gain is covered by the exclusion and no Form 1099-S was issued, you don’t report the sale at all.⁷ If a 1099-S was issued, you must still file Form 8949 and Schedule D to reconcile the reported proceeds. Enter the sale normally in Part II of Form 8949, then enter the excluded amount as a negative number in Column (g) using code “H.”⁹ Any gain above the exclusion flows through to Schedule D as taxable long-term capital gain.

Form 4797 for Rental and Business Property

Selling property you rented out or used in a business brings depreciation recapture. The portion of your gain tied to depreciation you previously deducted, called unrecaptured Section 1250 gain, is taxed at a maximum of 25%.¹⁰

Report the sale on Form 4797 (Sales of Business Property). Part III is where you calculate how much gain must be treated as ordinary income due to recapture.¹¹ The remaining gain above the recapture amount is a regular long-term capital gain.

This is the form people most often miss. If you ever rented out or used the property in a business, check whether Form 4797 applies before filing, even if you converted it back to personal use before selling. The IRS still wants the recapture on depreciation you took during the rental years.

Form 6252 for Seller-Financed Installment Sales

If you finance the sale yourself and receive at least one payment after the tax year of the sale, it’s an installment sale.¹² Instead of taxing the entire gain in year one, the installment method spreads it over the years payments arrive.

Report it on Form 6252 (Installment Sale Income).¹³ The form calculates a gross profit percentage (total gain divided by total contract price) and applies it to each payment received during the year. The taxable portion transfers to Schedule D.

One catch: depreciation recapture is recognized in full in the year of sale, no matter when the cash arrives. Only the remaining gain gets the installment treatment. You can also elect out of the installment method by reporting the whole gain on a timely filed return for the year of sale.¹²

Form 8824 for a 1031 Like-Kind Exchange

Sell investment or business real estate and reinvest the proceeds into similar property, and you can defer the entire capital gain under Section 1031. This only covers real property held for business or investment, not your personal home or property held primarily for resale.¹⁴

The deadlines are rigid. Identify the replacement property in writing within 45 days of selling the original, and close on the replacement within 180 days or by your tax return due date for that year, whichever is earlier.¹⁴ Miss either deadline by a day and the whole gain becomes taxable. Most sellers use a qualified intermediary to hold the proceeds, since touching the money yourself can disqualify the exchange.

Report a completed exchange on Form 8824 (Like-Kind Exchanges) for the year the transfer happened. If a related party was involved, file Form 8824 again for the following two years.¹⁵ U.S. real property and foreign real property are not like-kind to each other, so you can’t swap a domestic property for an overseas one.¹⁴

Form 8960 for the Net Investment Income Tax

High-income sellers also owe a 3.8% net investment income tax on top of capital gains tax. It applies when your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly).¹⁶ The tax is calculated on the lesser of your net investment income or the amount by which your income exceeds the threshold. Capital gains from property sales count as net investment income.¹⁷

Calculate and report it on Form 8960, filed with your 1040. The thresholds aren’t indexed to inflation, so a one-time property sale can push you over even if your regular income wouldn’t.

Form 8288 When the Seller Is Foreign

If the seller is a foreign person, the buyer (or settlement agent) must withhold 15% of the amount realized and send it to the IRS under the Foreign Investment in Real Property Tax Act.¹⁸ This is a prepayment against the seller’s final U.S. tax bill, not the final tax itself.

The buyer files Form 8288 and Form 8288-A within 20 days of the transfer to report and transmit the withheld amount.¹⁹ Before closing, the foreign seller can apply on Form 8288-B for a withholding certificate to reduce or eliminate the 15% if their actual liability will be lower.²⁰ FIRPTA doesn’t apply to U.S. citizen or resident sellers, so most domestic transactions skip this entirely.

Don’t Forget Estimated Tax Payments

A big capital gain can create a tax bill your paycheck withholding won’t cover. If you expect to owe at least $1,000 after subtracting withholding and refundable credits, you generally need to make estimated payments to avoid an underpayment penalty.²¹

For 2026, estimated payments are due April 15, June 15, September 15, and January 15, 2027.²¹ If your sale closes mid-year, you can annualize your income and make a larger payment for the quarter the sale hit, rather than spreading it evenly. Attach Form 2210 with Schedule AI to your return to show the uneven payments matched the timing of the income.²² Increasing your wage withholding for the rest of the year is another way to cover the extra liability.

1
Internal Revenue Service. Instructions for Form 8949 (2025)
2
Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets
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Internal Revenue Service. Publication 544, Sales and Other Dispositions of Assets
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Internal Revenue Service. 2025 Instructions for Schedule D (Form 1040)
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Internal Revenue Service. Publication 551, Basis of Assets
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eCFR. 26 CFR 1.1014-1 – Basis of Property Acquired From a Decedent
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Internal Revenue Service. Publication 523, Selling Your Home
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Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
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Internal Revenue Service. 2025 Instructions for Form 8949
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Internal Revenue Service. Topic No. 409, Capital Gains and Losses
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Internal Revenue Service. 2025 Instructions for Form 4797 – Sales of Business Property
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Office of the Law Revision Counsel. 26 USC 453 – Installment Method
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Internal Revenue Service. About Form 6252, Installment Sale Income
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Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use or Investment
15
Internal Revenue Service. Instructions for Form 8824 (2025)
16
Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
17
Internal Revenue Service. 2025 Instructions for Form 8960 – Net Investment Income Tax
18
Internal Revenue Service. FIRPTA Withholding
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Internal Revenue Service. Instructions for Form 8288 (Rev. January 2026)
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Internal Revenue Service. Applications for FIRPTA Withholding Certificates
21
Internal Revenue Service. 2026 Form 1040-ES
22
Internal Revenue Service. Large Gains, Lump Sum Distributions, Etc.