Free tax-loss harvesting calculator. Estimate tax savings from selling losing investments, accounting for the $3,000 annual deduction limit and wash sale rules.
The Tax-Loss Harvesting Calculator helps you estimate the tax savings from strategically selling investments at a loss to offset capital gains and reduce your tax bill. This powerful strategy, used by individual investors and professional wealth managers alike, can save thousands of dollars annually when executed properly.
Tax-loss harvesting works by realizing paper losses, using those losses to offset realized capital gains dollar for dollar, and deducting up to $3,000 of excess losses against ordinary income each year. Any remaining losses carry forward to future tax years indefinitely. The key constraint is the wash sale rule, which disallows the loss if you repurchase a substantially identical security within 30 days.
This calculator factors in your harvested losses, existing capital gains, marginal tax rate, transaction costs, and the annual deduction limit to show your net tax benefit. It also estimates the carry-forward amount if your losses exceed what can be used in the current year.
Tax-loss harvesting is one of the few legitimate strategies to immediately reduce your tax bill without changing your long-term investment strategy. By replacing a losing position with a similar (but not identical) investment, you maintain market exposure while booking a tax loss. This calculator quantifies the benefit so you can decide whether the savings justify the transaction costs.
Losses Used vs. Gains = min(Harvested Losses, Capital Gains) Gains Tax Saved = Losses Used vs. Gains × Capital Gains Tax Rate Remaining Loss = Harvested Losses – Losses Used vs. Gains Ordinary Income Offset = min(Remaining Loss, $3,000) Ordinary Income Tax Saved = Ordinary Income Offset × Marginal Tax Rate Total Tax Savings = Gains Tax Saved + Ordinary Income Tax Saved Net Benefit = Total Tax Savings – Transaction Costs Carry-Forward = Remaining Loss – Ordinary Income Offset
Result: Net tax benefit: $2,110
You harvest $15,000 in losses. First, $8,000 offsets realized capital gains, saving $8,000 × 15% = $1,200 in capital gains tax. The remaining $7,000 in losses: $3,000 offsets ordinary income at 32%, saving $960. Total tax savings = $1,200 + $960 = $2,160. After $50 in transaction costs, your net benefit is $2,110. The remaining $4,000 carries forward to next year.
The primary value of tax-loss harvesting comes from the time value of deferred taxes. By realizing losses today and deferring gain recognition to the future, you keep more money invested and compounding. Even though you may eventually pay capital gains tax on the replacement investment, the years of additional compounding on the deferred tax amount create real wealth. Some estimates suggest systematic tax-loss harvesting adds 0.5–1.5% per year in after-tax returns.
The 30-day wash sale window runs both before and after the sale date, creating a 61-day total restriction period. The rule applies across all accounts you own, including spousal accounts in some interpretations. If you accidentally trigger a wash sale, the disallowed loss gets added to the cost basis of the new shares, so it is not permanently lost—just deferred until the replacement shares are sold.
The most effective approach is to monitor your portfolio regularly for harvesting opportunities rather than waiting until year-end. Market corrections and individual stock pullbacks create harvesting windows throughout the year. Maintain a list of similar-but-not-identical replacement securities so you can act quickly. Many robo-advisors now offer automated tax-loss harvesting as a standard feature.
Tax-loss harvesting is the strategy of selling investments at a loss to generate capital losses that offset capital gains and up to $3,000 of ordinary income per year on your tax return. The goal is to reduce your current tax bill while maintaining a similar investment portfolio by purchasing a non-identical replacement security.
The wash sale rule prevents you from claiming a tax loss if you buy a substantially identical security within 30 days before or after the sale. If triggered, the disallowed loss is added to the cost basis of the replacement shares rather than being lost entirely. The rule applies across all your accounts, including IRAs.
After offsetting all capital gains, you can deduct up to $3,000 per year ($1,500 if married filing separately) of remaining net capital losses against ordinary income. Any excess losses carry forward indefinitely to future tax years. There is no limit on using losses to offset capital gains.
Yes. Any capital losses that exceed your capital gains plus the $3,000 ordinary income offset carry forward to the next tax year. They retain their character as short-term or long-term losses. There is no expiration on carry-forward losses; they persist until fully used.
It depends on your transaction costs and the complexity involved. For losses under a few hundred dollars, the administrative effort and potential trading costs may not justify the tax savings. For losses of $1,000 or more, the tax benefit usually outweighs the costs, especially if trading is commission-free.
No. Tax-loss harvesting only applies to taxable investment accounts. Gains and losses in IRAs, 401(k)s, and other tax-deferred accounts are not reported for tax purposes until distributions are taken. There is no tax benefit to selling at a loss inside a retirement account.
When you sell at a loss and buy a replacement investment, the new investment has a lower cost basis than the original. This means you may pay more capital gains tax in the future when you sell the replacement. Tax-loss harvesting defers taxes rather than eliminating them permanently, though the time value of deferred taxes is still beneficial.
The IRS has not precisely defined this term, but generally, shares of the same company, options on the same stock, and very similar mutual funds tracking the same index are considered substantially identical. Different index funds from different providers (e.g., an S&P 500 ETF vs. a total market ETF) are generally considered distinct enough to avoid the wash sale rule.