Sell losing positions to offset capital gains plus up to $3K of ordinary income; carry the rest forward. Watch the wash-sale rule (30 days). Compute the savings versus holding to recover.
Detailed instructions, formula notes, and US-context guidance shown in the calculator above.
Disclaimer: Estimate only. Consult a qualified professional for decisions with major financial, legal, or health consequences.
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Calculator information
📋 How to use this calculator
- Enter total realized capital gains for the year (short-term + long-term separately).
- Enter unrealized losses available in your taxable account that you could realize this year.
- Set marginal ordinary income tax rate and long-term capital gains rate.
- Account for wash sale rule — 30-day window before and after sale.
- Review tax savings from harvesting + carryforward of unused losses.
🧮 Tax-Loss Harvesting Net Benefit
Savings = ST_offset x Ordinary_rate + LT_offset x LTCG_rate + min($3,000, Excess) x Ordinary_rate
- Losses offset same-type gains first (ST↔ST, LT↔LT), then cross-type
- Net capital loss limit: $3,000/yr deducted from ordinary income ($1,500 MFS)
- Excess loss carries forward indefinitely (no expiration)
- Wash sale: same/substantially identical security purchase within 30 days disallows loss
- Spouse, IRA, and 401(k) purchases of same security also trigger wash sale
Harvest as late as Dec 30 (settlement T+1 by Dec 31). Avoid wash sale by waiting 31 days or buying a similar-but-not-identical fund (e.g., VTI → ITOT). The disallowed loss adds to basis of replacement shares — deferred, not lost.
💡 Worked example: Investor with $25K realized LTCG and $40K unrealized loss
Given:- Realized long-term gains YTD: $25,000 (sold Tesla early)
- Unrealized loss in tech ETF: -$40,000 (held 2 years)
- Marginal ordinary tax rate: 24%
- Long-term capital gains rate: 15%
- Filing status: Single
Steps:- Realize $40K loss before Dec 31
- Step 1: Offset $25K LTCG with $25K of loss → 0 LTCG tax
- Step 2: Remaining $15K loss applies to ordinary income, capped at $3K
- Step 3: $3,000 reduces taxable income → $720 ordinary tax saved
- Step 4: Carry forward $15,000 - $3,000 = $12,000 to next year
- Total Y1 tax savings: $25K x 15% (LTCG avoided) + $720 (ordinary) = $4,470
Result: $4,470 saved Y1; $12,000 carryforward will offset future gains or another $3K/yr ordinary income. Net of replacement purchase, you maintain market exposure.
❓ Frequently asked questions
What is the wash sale rule and how do I avoid it?
The wash sale rule disallows a capital loss if you buy the same or 'substantially identical' security within 30 days before OR after the sale. Purchase via spouse's account or IRA also triggers it. To avoid: wait 31 days to repurchase, OR buy a similar-but-different fund (e.g., sell Vanguard VTI total stock market, buy iShares ITOT total stock market — they track different indices, not substantially identical per IRS guidance). Many investors stay in market by holding a similar fund during the 30-day window.
Can I harvest losses in an IRA or 401(k)?
No — tax-loss harvesting only works in TAXABLE brokerage accounts. Tax-deferred accounts (Traditional IRA, 401k, 403b) don't recognize gains or losses until withdrawal. Tax-free accounts (Roth IRA, HSA) never recognize gains or losses. WORSE: selling in a taxable account THEN buying the same security in your IRA WITHIN 30 days creates a wash sale that permanently disallows the loss (it can't be added to IRA basis).
What's the $3,000 limit and why does it matter?
Net capital losses (losses minus all gains) above $0 can offset up to $3,000 of ordinary income per year ($1,500 MFS). Excess CARRIES FORWARD indefinitely — no expiration, no annual decay. A $50,000 loss in a bad year offsets $3,000/yr of ordinary income for 16+ years if you have no future gains. Pairing carryforward with future high-income or large-gain years is highly tax-efficient.
Should I harvest if I'm in the 0% LTCG bracket?
Generally NO if your income is so low that LTCG rate is 0% (single < $44,625 / MFJ < $89,250 in 2026 taxable income). At 0% LTCG rate, losses save you 0% on capital gains. However, the $3,000 ordinary-income offset still applies regardless of bracket — so harvesting up to $3K/yr of loss to reduce wage taxes is still beneficial. Above $3K loss, no immediate value if you're in 0% LTCG.
Can robo-advisors automate this?
Yes — Wealthfront, Betterment, Schwab Intelligent Portfolios, and Fidelity Go all offer automated tax-loss harvesting. Typical service: daily scan of holdings, auto-sell losers, simultaneously buy a similar (not identical) replacement to avoid wash sale and maintain market exposure. Claimed alpha: 0.5-1.0% tax-equivalent annually. Caveat: realized losses today shift basis lower, increasing future taxable gains — TLH defers, doesn't eliminate. Best deployed early in investing career with long horizon to compound.
📚 Sources & references
Last updated: May 23, 2026