Tax-Loss Harvesting Amount Calculator
Tax-loss harvesting can meaningfully reduce your annual capital gains tax bill by realising paper losses to offset paper or actual gains. The strategy works by selling a losing position, booking the loss for tax purposes, and immediately reinvesting in a comparable but not identical security to preserve your portfolio exposure. The IRS allows capital losses to offset capital gains dollar-for-dollar, and net losses of up to $3,000 per year can also reduce ordinary income. Any remaining loss carries forward to future years. The actual tax benefit depends on the size of the loss, your capital gains tax rate, whether the loss offsets short-term or long-term gains, and your marginal income tax rate for any $3,000 ordinary income offset. This calculator estimates the immediate tax saving and after-tax benefit of harvesting a specific loss amount.
Tax-loss harvesting formula
Step 1: Offset ST gains up to available loss
Step 2: Offset LT gains with remaining loss
Step 3: Offset up to $3,000 of ordinary income
Step 4: Carry forward any remaining loss
Tax Saved = (ST offset x ST rate) + (LT offset x LT rate) + (OI offset x income rate)
Net Benefit = Tax Saved (deferral value only; replacement basis is reduced)
Key tax-loss harvesting rules (IRS)
- Wash-sale rule: do not repurchase the same or substantially identical security within 30 days before or after the sale.
- Net capital losses offset up to $3,000 of ordinary income per year ($1,500 if married filing separately).
- Excess losses carry forward indefinitely to offset future gains or the $3,000 annual ordinary income allowance.
- Loss character (short vs long-term) is determined by how long you held the sold investment, not the replacement.
Tax-loss harvesting: frequently asked questions
What is tax-loss harvesting?
Tax-loss harvesting is the practice of selling an investment that has declined in value to realise a capital loss. That loss offsets capital gains from other sales, reducing your tax bill. You can then reinvest in a similar (but not identical) asset to maintain your desired market exposure. Capital losses can also offset up to $3,000 of ordinary income per year.
What is the wash-sale rule?
The wash-sale rule (IRC Section 1091) disallows a loss if you buy a 'substantially identical' security within 30 days before or after the sale. If you sell a stock at a loss and repurchase the same stock within the 61-day window (30 days before + sale day + 30 days after), the loss is disallowed and added to the basis of the repurchased shares. Buying a similar but not identical ETF or stock avoids the rule.
How do short-term and long-term losses differ?
Short-term capital losses (assets held 1 year or less) first offset short-term gains (taxed as ordinary income), and long-term losses first offset long-term gains (taxed at preferential rates). Excess losses from either bucket can then offset gains in the other bucket. Net losses beyond all gains can offset up to $3,000 of ordinary income per year, with excess carried forward indefinitely.
Is tax-loss harvesting always beneficial?
Tax-loss harvesting defers tax rather than eliminating it. Your replacement investment inherits a lower basis, so when you sell it you will owe capital gains on the harvested amount. The benefit is the time value of the tax deferral. Harvesting is most valuable when you are in a high tax bracket now and expect a lower bracket in the future, or if the assets will be donated or passed on at death (stepped-up basis).
Can I harvest losses in a tax-advantaged account?
No. Losses inside an IRA, 401(k), or other tax-deferred or tax-exempt account have no tax benefit because gains are never taxed (Roth) or are already deferred until withdrawal (traditional). Tax-loss harvesting only applies to taxable brokerage accounts.
Official sources
- IRS Topic No. 409: Capital Gains and Losses.
- IRS Publication 550: Investment Income and Expenses (Wash Sales, IRC Sec 1091).
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.