Tax Loss Harvesting Calculator

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):

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).