Filing a Schedule D With Your Form 1040

Gains and certain losses resulting from the sale of capital assets, as well as certain other items, are reported on Form 1040 Schedule D. It is generally used to report:

Most assets that a taxpayer owns and uses for personal purposes or investment are capital assets. Houses, furniture, cars, stocks, and bonds are generally capital assets. When selling these at a profit, except when exempt (such as the tax break on the sale of a primary residence, more here), a taxpayer is responsible for the capital gains tax.

A capital loss (selling at a loss) may be used to offset a gain in another other sale. When losses exceed gains in a calendar year they are deductible up to $3,000 ($1,500 if married filing separately). Excess capital losses may be carried over to future years.

The following are not capital assets:

Short-Term and Long-Term Gains and Losses

Short-term capital gains and losses are reported in Part I of the Schedule D. A gain or loss is short-term if it resulted from the sale of an asset that the taxpayer held for one year or less. If short-term gains exceed short-term losses, the taxpayer pays tax on the net gain at ordinary income rates.

Long-term capital gains and losses, which result from the sale of assets held by the taxpayer for more than one year, are reported on Part II. The tax rates on long-term gains are generally much lower than those of ordinary income tax.

You can find more on understanding and calculating capital gains tax, here.