Tax Loss Harvesting Calculator

Tax loss harvesting is the practice of selling investments at a loss to offset capital gains and reduce your tax liability. Realized losses first offset capital gains of the same type (short-term against short-term, long-term against long-term), then net losses can offset gains of the other type. Any remaining net capital loss can offset up to $3,000 of ordinary income per year, and unused losses carry forward indefinitely to future tax years.

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 that generated the loss. If a wash sale occurs, the disallowed loss is added to the cost basis of the replacement shares, deferring (not permanently eliminating) the tax benefit. The rule applies to stocks, bonds, mutual funds, and options on the same security.

After offsetting all capital gains, net capital losses can reduce ordinary income by up to $3,000 per year ($1,500 if married filing separately). Any excess losses are not lost — they carry forward indefinitely and can be used in future tax years to offset capital gains or ordinary income under the same annual limit.

You can harvest losses at any time during the tax year, not just at year-end. Good times to consider harvesting include when you have realized gains to offset, when a position has declined significantly and you want to capture the deduction, or when you expect to be in a higher tax bracket in future years. Year-end is a common window because you know your full-year gain picture, but acting earlier gives you more flexibility to reinvest without triggering the wash sale rule.