Tax-Loss Harvesting Calculator

Frequently Asked Questions

How does tax-loss harvesting work?

You sell a losing position to realize a capital loss, which offsets capital gains and up to $3,000/year of ordinary income. Excess losses carry forward indefinitely. The proceeds are reinvested in a similar (but not "substantially identical") security.

What is the wash-sale rule?

You cannot claim a loss if you buy the same or "substantially identical" security within 30 days before or after the sale. Buying back into a similar but not identical fund (e.g., swapping VTI for ITOT) is a common workaround.

What is the value of harvesting losses?

For a high-bracket investor (37% federal + state), every $10,000 of harvested loss can save $3,500-$5,000 in current taxes. Studies estimate annual after-tax alpha of 0.5-1.5% in volatile markets.

Are there pitfalls?

Yes: you reset cost basis lower, increasing future taxable gains. The strategy provides a deferral, not permanent savings, unless you donate appreciated shares or hold until death (step-up in basis). It also requires meticulous record-keeping.

Provided by AllCalculators.io
Free online calculators for everyday. No registration required.

Estimates only. Not investment advice.

Investment Disclaimer: Estimates only. Not investment advice.

This calculator provides estimates for educational purposes only and is not investment advice. Past performance does not guarantee future results. Consult with a qualified financial advisor before making investment decisions. All investments carry risk, including potential loss of principal.

JavaScript is required to use the interactive calculator above. The questions and answers below remain readable without JavaScript.

How This Calculator Works

You enter your realized capital gains year-to-date, the losses you could harvest, your ordinary income, your capital-gains rate, and your marginal rate. The tool applies the losses in the order the IRS requires. First, losses cancel realized gains dollar-for-dollar. Next, up to $3,000 of any remaining loss offsets ordinary income. Finally, whatever is left becomes a carryforward available in future years. It then quantifies the tax saved at each step, the net tax you would owe after harvesting versus without it, and a recommended harvest amount sized to wipe out your gains plus the $3,000 ordinary-income cap.

Formulas Used

Offset against gains = min(losses, gains). Remaining loss = losses − that offset. Offset against ordinary income = min(remaining, $3,000). Carryforward = remaining − that ordinary offset. Savings from gains = gains offset × capital-gains rate; savings from ordinary = ordinary offset × marginal rate; total savings is their sum. Tax without harvesting = gains × capital-gains rate. Recommended harvest = gains + $3,000.

Worked Example

You have $15,000 of realized gains and $20,000 of harvestable losses, taxed at a 15% capital-gains rate and a 24% marginal rate. The first $15,000 of losses cancels the gains, saving 15% × $15,000 = $2,250. The next $3,000 offsets ordinary income, saving 24% × $3,000 = $720. The final $2,000 carries forward to future years. Total immediate tax savings: $2,970 - and the carryforward still has real value down the road.

Common Mistakes

Triggering the wash-sale rule by buying the same or a "substantially identical" security within 30 days before or after the loss sale, which disallows the loss.

Trying to harvest inside an IRA or 401(k), where losses have no tax effect - this only works in taxable accounts.

Treating harvesting as free money; it lowers your cost basis, so it defers tax rather than erasing it.

Waiting until December - the best opportunities appear during mid-year drawdowns.

Tips & FAQ

To stay clear of the wash-sale rule, swap into a similar-but-not-identical fund (for example, one S&P 500 ETF for another tracking a slightly different index) and keep a watchlist of correlated replacements. The disallowed loss, if you do trip the rule, is added to the basis of the replacement shares rather than lost forever. The $3,000 annual ordinary-income cap has been unchanged since 1978, but unused losses carry forward indefinitely. Consider pairing harvesting with tax-gain harvesting in years you fall in the 0% capital-gains bracket. Educational only, not tax or investment advice.

Tax-Loss Harvesting Calculator

Frequently Asked Questions

Related Investment Calculators