Tax Loss Harvesting Assistant Calculator
Calculate tax loss harvesting assistant with our free tool. Get data-driven results, visualizations, and actionable recommendations.
Reviewed by Daniel Agrici, Founder & Lead Developer
Formula
Tax Savings = (Loss Offsetting Gains x CG Rate) + (min(Remaining, $3000) x Income Rate)
Realized losses first offset capital gains dollar-for-dollar at the applicable capital gains rate. Remaining losses offset up to $3,000 of ordinary income at your marginal tax rate. Any excess carries forward to future years. The net benefit subtracts estimated transaction costs from immediate tax savings.
Worked Examples
Example 1: Offsetting Capital Gains
Problem:You bought stock for $50,000, now worth $35,000. You have $10,000 in realized capital gains this year. You are in the 24% tax bracket, short-term holding.
Solution:Unrealized Loss: $50,000 - $35,000 = $15,000\nGains Offset: min($15,000, $10,000) = $10,000\nTax Savings (gains): $10,000 x 24% = $2,400\nRemaining Loss: $15,000 - $10,000 = $5,000\nOrdinary Income Offset: min($5,000, $3,000) = $3,000\nTax Savings (income): $3,000 x 24% = $720\nCarryforward: $5,000 - $3,000 = $2,000\nImmediate Savings: $2,400 + $720 = $3,120
Result:Harvest recommended | Immediate savings: $3,120 | Carryforward: $2,000 (1 year)
Example 2: Small Loss with No Gains to Offset
Problem:You bought a fund for $20,000, now worth $18,000. No capital gains this year. 32% tax bracket, long-term holding.
Solution:Unrealized Loss: $20,000 - $18,000 = $2,000\nGains Offset: $0 (no gains)\nOrdinary Income Offset: min($2,000, $3,000) = $2,000\nTax Savings: $2,000 x 32% = $640\nTransaction Cost: $18,000 x 0.2% = $36\nNet Benefit: $640 - $36 = $604
Result:Harvest recommended | Net benefit: $604 | Loss applied to ordinary income
Frequently Asked Questions
When is tax-loss harvesting most beneficial?
Tax-loss harvesting provides the greatest benefit in these situations: when you have significant realized capital gains to offset (from selling appreciated stocks, mutual fund distributions, or business sales), when you are in a high tax bracket (24%+ federal), when losses are substantial enough that the tax savings exceed transaction costs, and when you can maintain equivalent market exposure through substitute investments. The strategy is particularly valuable in volatile markets where temporary paper losses can be converted to real tax benefits. Year-end is the most common time, but opportunities arise throughout the year. High-income investors in the 37% bracket save $0.37 per dollar of short-term loss harvested.
What are the risks and downsides of tax-loss harvesting?
While generally beneficial, tax-loss harvesting has some caveats. Transaction costs (commissions, bid-ask spreads) reduce the net benefit, though with commission-free trading this is minimal. If you violate the wash sale rule, you lose the current deduction. The new lower cost basis means larger gains when you eventually sell, so tax-loss harvesting defers taxes rather than eliminating them entirely (unless you donate the shares or hold until death for a stepped-up basis). Frequent trading creates complexity at tax time and requires careful record keeping. The strategy also requires discipline to sell losing positions, which can be psychologically difficult. Finally, if your tax bracket changes significantly in the future, the deferred benefit may be at a different rate.
What is tax-loss harvesting and how much can it actually save me?
Tax-loss harvesting means deliberately selling an investment at a loss to realize that loss for tax purposes, using it to offset capital gains elsewhere in your portfolio (or up to $3,000 against ordinary income per year if losses exceed gains). The actual dollar savings equals the harvested loss multiplied by your applicable capital gains or ordinary income tax rate — a $10,000 harvested long-term loss offsetting a gain taxed at 15% saves roughly $1,500 in taxes for that year.
What happens to a tax loss I can't use fully in the current year?
Any net capital loss beyond what you can deduct in the current year (gains offset plus the $3,000 ordinary-income limit) carries forward indefinitely to future tax years, retaining its short-term or long-term character, until it's fully used against future gains or the annual ordinary-income deduction. There's no expiration on carried-forward capital losses for individual taxpayers.
References
Reviewed by Daniel Agrici, Founder & Lead Developer · Editorial policy