Tax-Loss Harvesting Calculator
See how selling losing investments can reduce your tax bill.
Investment Gains & Losses
Tax Savings from Harvesting
| How Loss Is Used | Amount | Tax Rate | Savings |
|---|---|---|---|
| Short-term gains offset | $5,000 | 24% + 5% state | $1,450 |
| Long-term gains offset | $10,000 | 15% + 5% state | $2,000 |
Strategy Tips
- 1.Offsetting short-term gains saves the most — they're taxed at your 24% ordinary rate
- 2.Wash sale rule: don't buy the same or 'substantially identical' security within 30 days before or after selling at a loss
- 3.Consider replacing sold positions with similar (not identical) ETFs to maintain market exposure
This is a simplified estimate. Consult a tax advisor for specific guidance on tax-loss harvesting strategies.
How Tax-Loss Harvesting Works
Tax-loss harvesting means selling investments at a loss to offset capital gains and reduce your tax bill. Losses first offset same-type gains (short-term losses offset short-term gains), then offset the other type. Excess losses up to $3,000/year can be deducted from ordinary income. Any remaining losses carry forward indefinitely. The strategy works best in taxable brokerage accounts — not IRAs or 401(k)s, which are already tax-advantaged.
Loss Offset Priority Rules
| Step | Action | Tax Impact |
|---|---|---|
| 1 | Offset short-term gains | Saves at ordinary income rate (10–37%) |
| 2 | Offset long-term gains | Saves at LTCG rate (0%, 15%, or 20%) |
| 3 | Deduct $3,000 from ordinary income | Saves at marginal rate |
| 4 | Carry forward remaining losses | Use in future tax years |
Annual Tax Savings by Bracket
| Federal Bracket | $10K Short-Term Offset | $10K Long-Term Offset | $3K Ordinary Deduction |
|---|---|---|---|
| 12% | $1,200 | $0 (0% LTCG rate) | $360 |
| 22% | $2,200 | $1,500 | $660 |
| 24% | $2,400 | $1,500 | $720 |
| 32% | $3,200 | $1,500 | $960 |
| 37% | $3,700 | $2,000 | $1,110 |
Frequently Asked Questions
What is the wash sale rule?
The wash sale rule prevents you from claiming a loss if you buy the same or "substantially identical" security within 30 days before or after the sale. If you sell an S&P 500 index fund at a loss, you can't buy a different S&P 500 index fund — but you could buy a total stock market fund or a large-cap fund that tracks a different index. The IRS hasn't clearly defined "substantially identical," so most advisors recommend switching to a different index entirely.
Is tax-loss harvesting worth the effort?
For portfolios over $100,000 in taxable accounts, harvesting typically saves $1,000–$5,000+ annually depending on market conditions and your tax bracket. Studies show systematic tax-loss harvesting can add 0.5–1.5% to after-tax returns annually. The key is consistency — harvesting throughout the year, not just in December.
See also: Capital Gains Tax Calculator and Dividend Income Calculator.