Calculator
Tax-Loss Harvesting Calculator
Tax-Loss Harvesting Calculator
Realized Losses (Positions You Would Sell)
Realized Gains (Already Locked In This Year)
Estimated Tax Savings
$1,410
Harvesting Analysis
Harvesting these positions could save roughly $1,410 in taxes this year. $7,000 of losses cancel gains taxed at roughly your 22% bracket.
Federal estimate only. Consult a tax professional; state taxes, the 0% long-term bracket, and the 3.8% NIIT are simplified or omitted. Beware the IRS wash-sale rule: you may not repurchase a substantially identical security within 30 days before or after the sale.
Tax-Loss Harvesting: Turning Losing Positions into Tax Savings
Tax-loss harvesting is the disciplined practice of selling investments that are down in value to realize a tax deduction, then redeploying the proceeds into similar (but not substantially identical) holdings so your portfolio stays invested. It sounds counterintuitive — selling losers on purpose — but realized capital losses are one of the few deductions an investor can generate on demand, and they work against gains taxed at rates up to 20 percent federal, plus the 3.8 percent net investment income tax. For US investors, the rules are specific. Short-term and long-term losses first offset gains of the same type, then cross over. Any net loss beyond gains can deduct up to 3,000 dollars from ordinary income each year, with the remainder carrying forward indefinitely. The strategy matters most in volatile years, in taxable accounts, and for those in higher brackets. One critical constraint is the IRS wash-sale rule: buy back the same or a substantially identical security within 30 days and you forfeit the loss. Harvesting is not a free lunch — it converts today's loss into a lower cost basis tomorrow — but done correctly it can shave hundreds or thousands off a tax bill every year.
Behind the Formula: Netting, the $3,000 Cap, and Carryovers
The calculator replicates the IRS netting procedure. Step one: short-term losses net against short-term gains, long-term against long-term. Step two: if one bucket is net negative and the other net positive, the loss crosses over to offset the opposing gain. Step three: if a loss remains, it deducts up to 3,000 dollars from ordinary income, with any excess carried forward to future years — this is the annual cap that makes harvesting a recurring, multi-year benefit rather than a one-time event. To translate loss into dollars saved, the tool estimates your marginal rate using 2024 single and joint brackets plus the standard deduction, taxes your income-and-gains picture with and without the harvested losses, and reports the difference. Long-term gains receive the preferential 0/15/20 percent treatment, while short-term gains are taxed at ordinary rates — which is why offsetting short-term gains (taxed up to 37 percent) is far more valuable than using the same loss against long-term gains taxed at 15 percent. The model is simplified — it omits the 3.8 percent NIIT, state taxes, and phaseouts — so treat outputs as directional planning figures, not a tax return.
Expert Insights
Prioritize Offsetting Short-Term Gains
A dollar of short-term gain is taxed at ordinary rates up to 37 percent, while long-term gains max out at 20 percent. When you have both realized gains and a pool of losses, direct the loss against short-term gains first to maximize the dollar value of each loss dollar. Most brokerages net automatically under IRS rules, but the insight holds for planning: harvest before you realize short-term profits.
Respect the Wash-Sale Rule — and the 30-Day Window
If you repurchase a substantially identical security within 30 days before or after a loss sale, the IRS disallows the loss. The window runs in both directions, so an automatic dividend reinvestment into the same fund can unexpectedly trigger a wash sale. Workaround: swap into a similar-but-not-identical fund — an S&P 500 tracker can be replaced with a total-market fund — preserving exposure while keeping the loss deductible.
The $3,000 Ordinary-Income Deduction Is an Annuity
When losses exceed gains, the 3,000-dollar annual deduction against salaries and income is remarkably valuable, especially if you have a large loss carryover from a bad year. A 30,000-dollar carryover at a 32 percent bracket is worth 9,600 dollars, delivered as 960 dollars a year for a decade. That makes heavy harvest years worth doing even when you have no gains to offset.
Actionable Tips
- 1
Review for Harvesting Candidates Every Quarter
Scan your taxable account quarterly for positions down 5 percent or more from their cost basis. Automate alerts for positions you would happily harvest. Selling promptly after a meaningful decline lets you pair losses against that year's gains rather than waiting until December when markets may have recovered the loss you needed.
- 2
Harvest in Taxable Accounts, Not IRAs
Tax-loss harvesting only works in taxable brokerage accounts. Losses realized inside an IRA or 401k are not deductible and merely reduce a tax-advantaged balance permanently. Conversely, harvesting gains in a taxable account to use up a low-rate bracket is a related move — check your bracket before selling winners.
- 3
Use the Proceeds to Stay Invested in a Similar Asset
The point of harvesting is not to go to cash. Swap a losing large-cap fund for another large-cap index fund, or a sector ETF for a broad-market one that overlaps it. You keep market exposure, lock the tax benefit, and can buy back the original position after 31 days if you still prefer it — though often the replacement proves perfectly good.
Real-World Examples
Priya Offsets a Stock Bonus Gain
Priya, a product manager in San Jose, sold RSUs for 8,000 dollars of short-term gain. Before year-end she harvested 8,000 dollars of losses from an underperforming tech fund, zeroing the gain entirely. At her 24 percent bracket she saved about 1,920 dollars, and moved the harvested proceeds into a diversified index fund she planned to keep anyway.
Dan Converts a Bad Fund Year into Future Deductions
After a rough year, Dan, a small-business owner in Ohio, had 15,000 dollars of unrealized losses. With no gains to offset, he harvested anyway: 3,000 dollars deducted against ordinary income and 12,000 dollars carried forward. Over the next four years that carryover would offset gains he realized, turning a bad investment year into roughly 3,600 dollars of cumulative tax savings.
The Robinsons Time a Swap Around Rebalancing
During their annual rebalance, the Robinsons in Atlanta noticed two international funds were under water. They harvested 11,000 dollars of losses against 9,000 dollars of gains realized elsewhere, then bought two similar-but-different international funds to avoid wash sales. The transaction kept their allocation intact and cut their federal bill by about 1,350 dollars.
Glossary of Terms
- Wash Sale
- A sale at a loss where the taxpayer buys a substantially identical security within 30 days before or after; the IRS disallows the loss deduction and adds it to the new position's basis.
- Loss Carryover
- Capital losses in excess of gains plus the $3,000 annual ordinary-income deduction, carried forward to offset gains or income in future tax years with no expiration.
- Cost Basis
- The original purchase price of a security used to compute gain or loss on sale. Harvesting a loss lowers the basis of the replacement, which can affect future taxable gains.
Frequently Asked Questions
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Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the US tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.