Tax Loss Harvesting Calculator
Calculate potential tax savings from selling losing investments to offset capital gains.
Returns net tax benefit after wash-sale rule and reinvestment cost.
Tax-loss harvesting is the strategy of deliberately selling investments that have declined in value to realize a capital loss, which can then be used to offset capital gains — reducing your tax bill. The freed cash is immediately reinvested in a similar (but not “substantially identical”) asset to maintain market exposure.
The core tax savings formula:
Tax Savings = Realized Loss × Applicable Tax Rate
Net Benefit = Tax Savings − Transaction Costs − Reinvestment Costs
Tax rate context (US, 2024):
| Gain Type | Tax Rate |
|---|---|
| Short-term (held < 1 year) | Ordinary income rate (10–37%) |
| Long-term (held ≥ 1 year) | 0%, 15%, or 20% |
| Net investment income surtax (high earners) | +3.8% |
Worked example: An investor in the 24% income tax bracket has:
- $8,000 in short-term capital gains from selling stock A
- Stock B has declined, with an unrealized loss of $5,000
Harvest the loss from Stock B:
- Loss offsets the gain: $8,000 − $5,000 = $3,000 net gain
- Tax on $3,000 at 24%: $720 owed (instead of $1,920 on the full $8,000)
- Tax savings: $1,200
Reinvest the proceeds in a similar ETF that tracks the same index — maintains full market exposure while locking in the tax benefit.
The Wash-Sale Rule (critical): The IRS prohibits claiming a loss if you buy the “substantially identical” security within 30 days before or after the sale. The wash-sale window is 61 days total (30 days before sale, day of sale, 30 days after).
Loss carryforward: Net capital losses exceeding $3,000 in a given year cannot all be deducted immediately — only $3,000/year can offset ordinary income. The remaining loss carries forward indefinitely to future tax years.
Limitations: Tax-loss harvesting is most valuable for investors in high income tax brackets with taxable brokerage accounts. It has no benefit in tax-advantaged accounts (IRA, 401k).