Tax-Loss Harvesting Savings Calculator
Calculate tax savings from tax-loss harvesting your investments.
Get federal and state savings, ordinary-income offset, and carryforward by tax bracket.
Tax-Loss Harvesting (TLH)
TLH is the practice of selling losing investments to realize capital losses, then using those losses to offset capital gains and (up to $3,000) ordinary income. The proceeds are reinvested in similar — but not “substantially identical” — securities to maintain market exposure.
The basic formula: Tax savings = Realized loss × Marginal tax rate (federal + state)
Where loss applies first to capital gains (same character matched first), then up to $3,000/year against ordinary income, with excess carried forward indefinitely.
Loss matching priority (IRS):
- Short-term losses offset short-term gains first
- Long-term losses offset long-term gains first
- Excess of either offsets the other type
- Net loss reduces ordinary income up to $3,000/year
- Remaining loss carries forward indefinitely
Federal capital gains tax rates (2026):
| Type | Rate (Single) | Rate (Married) |
|---|---|---|
| Short-term (held < 1 year) | Marginal (10-37%) | Marginal |
| Long-term, low bracket | 0% (income < $47,025) | 0% (income < $94,050) |
| Long-term, mid bracket | 15% | 15% |
| Long-term, high bracket | 20% (income > $518,900) | 20% (income > $583,750) |
| Net Investment Income Tax | +3.8% | +3.8% (income > $200K/$250K) |
State capital gains: Most states tax capital gains as ordinary income (CA up to 13.3%, NY up to 10.9%, TX/FL/WA = 0%). Add to federal for total marginal rate.
The wash-sale rule (CRITICAL): You CANNOT deduct a loss if you buy a “substantially identical” security within 30 days before or after the sale. The wash window is 61 days total.
Wash-sale safe alternatives:
- Different ETF tracking different index (e.g., sell VTI, buy ITOT or SCHB — wait it gets gray)
- Different sector / style (sell SPY, buy VXF mid/small)
- Wait 31+ days then re-buy original security
- Buy a related but distinct fund (sell VTI, buy VTSAX — same fund, technically identical, NOT safe)
Common TLH mistakes:
- Buying back substantially identical security within 30 days (wash-sale violation)
- Buying in spousal IRA same security (treated as you)
- Triggering short-term losses unnecessarily (worth less if matched against long-term gains)
- Forgetting state taxes (often the bigger half of total savings)
- Harvesting tiny losses that don’t offset trading costs/spreads
TLH “value-add” estimate: Annual TLH typically adds 0.5-1.5% to after-tax return, more in volatile markets. Over 30 years, this compounds significantly — but ONLY in taxable accounts. Tax-advantaged (IRA, 401k) accounts have NO TLH benefit.
Roboadvisors that do TLH automatically:
- Wealthfront (TLH on $0+, daily)
- Betterment (TLH on $0+, daily)
- Schwab Intelligent Portfolios ($50K+ for TLH)