Tax Loss Harvesting Calculator 2025 – Offset Capital Gains & Save Taxes

Introduction

Tax-loss harvesting is one of the most powerful tax-reduction strategies available to investors, yet many people leave thousands of dollars on the table by not using it. The strategy is simple: sell losing investments to offset gains from winners, reducing your tax bill.

A $10,000 harvested loss can save you $1,500-$3,700 in taxes depending on your bracket. Do this consistently for decades, and you're talking about $50,000-$100,000+ in lifetime tax savings—money that stays invested and compounds.

The Tax Loss Harvesting Calculator helps you identify opportunities, calculate potential savings, and avoid the wash sale rule that can disqualify your deduction.

How Tax Loss Harvesting Works

The Basic Mechanics

1. Identify a losing position: You bought Stock A for $10,000, now worth $7,000 (loss: $3,000)
2. Sell the loser: Realize the $3,000 loss
3. Offset gains: Use the loss to offset $3,000 in capital gains from other investments
4. Reinvest immediately: Buy a similar (but not identical) investment to maintain market exposure

Result: You stay invested in the market but saved $450-$1,110 in taxes (15-37% of $3,000).

Tax Savings Formula

Short-Term Capital Gains Tax: 10%-37% (your ordinary income rate) Long-Term Capital Gains Tax: 0%, 15%, or 20% (based on income)

Example Calculation:

• Harvested Loss: $5,000
• Offsetting Short-Term Gains
• Tax Bracket: 24%
• Tax Savings: $5,000 × 0.24 = $1,200

The $3,000 Annual Deduction

If you have more losses than gains, you can deduct up to $3,000/year against ordinary income. Excess losses carry forward indefinitely.

Example:

• Total Losses: $10,000
• Total Gains: $2,000
• Net Loss: $8,000
• Year 1: Deduct $3,000 against income
• Year 2: Deduct $3,000 against income
• Year 3: Deduct $2,000 against income

The Wash Sale Rule: Don't Get Disqualified

Critical Rule: You cannot buy a "substantially identical" security 30 days before or after the sale, or the loss is disallowed.

Wash Sale Violations

Example of What NOT to Do:

1. Sell Apple stock at a loss on Dec 15
2. Buy Apple stock on Dec 20
3. VIOLATION: Loss is disallowed

61-Day Window: 30 days before + day of sale + 30 days after = 61-day blackout

How to Avoid Wash Sales

Strategy 1: Buy Similar But Different

• Sell Vanguard S&P 500 ETF (VOO)
• Buy Schwab S&P 500 ETF (SCHX)
• Different enough to avoid wash sale, nearly identical performance

Strategy 2: Wait 31 Days

• Sell on Dec 1
• Wait until Jan 1 (31 days)
• Rebuy the exact same security

Strategy 3: Double Up, Then Sell

• Own $10k of Stock A (down 30%)
• Buy another $10k of Stock A
• Wait 31 days
• Sell the original $10k at a loss
• Maintains exposure throughout

Tricky Wash Sale Triggers

These also count as "substantially identical":

• Buying in your IRA while selling in taxable (VIOLATION!)
• Buying in spouse's account (VIOLATION!)
• Dividend reinvestment during 61-day window (VIOLATION!)
• Options on the same stock

When to Harvest Losses

Year-End (October-December)

Most harvesting happens in Q4 to offset gains realized earlier in year.

Checklist:

1. Review all positions
2. Identify losses \u003e$1,000
3. Calculate tax savings
4. Check for wash sale conflicts
5. Execute sales early December (avoid year-end volatility)

Opportunistic (Market Crashes)

March 2020 COVID Crash: Investors who harvested losses when the market dropped 34% saved massive amounts on taxes while buying back identical positions 31 days later at similar prices.

Strategy: Set alerts for 10%+ portfolio drops, review positions, harvest losses, reinvest in similar assets.

Rebalancing

Combine loss harvesting with portfolio rebalancing for maximum efficiency.

Example:

• Target: 70% stocks, 30% bonds
• Current: 75% stocks (winners), 25% bonds (losers)
• Harvest bond losses, rebalance to 70/30

Tax Loss Harvesting Examples

Example 1: Offsetting Short-Term Gains

Scenario:

• Sold Stock A: +$15,000 gain (held \u003c1 year)
• Stock B down $15,000 (paper loss)
• Income Tax Bracket: 32%

Action:

• Harvest Stock B loss
• Buy similar ETF to maintain exposure

Tax Savings:

• Without harvesting: $15,000 × 32% = $4,800 tax owed
• With harvesting: Gains offset, $0 tax owed
• Savings: $4,800

Example 2: Creating Deductions Against Income

Scenario:

• No capital gains this year
• Stock portfolio down $20,000

Action:

• Harvest $20,000 in losses
• Rebuy similar funds after 31 days

Tax Benefit:

• Year 1: Deduct $3,000, save $720-$1,110 (24-37% bracket)
• Year 2-6: Carry forward $3,000/year
• Total: $4,320-$6,660 saved

Example 3: Long-Term Strategy

Harvest small losses annually to build up loss carryforwards, then use them when you have a big gain event (selling a business, exercising stock options, selling rental property).

Year 1-5: Harvest $5,000/year in small losses = $25,000 total Year 6: Sell business for $100,000 gain

• Offset $25,000 with carryforward losses
• Pay tax on only $75,000 instead of $100,000
• Tax Savings: $5,000-$7,400 (20% long-term cap gains rate)

Best Practices for Tax Loss Harvesting

1. Prioritize Short-Term Losses

Short-term gains are taxed at 10-37%, long-term at 0-20%. Harvesting short-term losses first saves more.

2. Don't Let Tax Tail Wag Investment Dog

Never sell a great investment just for a tax deduction. Only harvest if you're willing to:

• Buy back after 31 days
• Switch to a similar investment permanently

3. Use Tax-Loss Harvesting Software

Robo-Advisors with Auto-Harvesting:

• Wealthfront
• Betterment
• M1 Finance

These automate daily loss scanning and execute tax-optimized trades.

4. Track Your Basis

Keep meticulous records of:

• Purchase dates
• Cost basis
• Wash sale adjustments
• Carryforward losses

Use: Brokerage statements, tax software (TurboTax, H&R Block), or spreadsheets

Common Mistakes

Mistake 1: Wash Sale in IRA

Selling Stock A at a loss in taxable account, then buying Stock A in IRA/401k = wash sale. Loss disallowed.

Fix: Don't buy the same security across any accounts during 61-day window.

Mistake 2: Forgetting Dividend Reinvestment

If you have DRIP (dividend reinvestment) turned on, every dividend purchase counts as a "buy."

Fix: Turn off DRIP 30 days before loss harvesting if you plan to rebuy same security.

Mistake 3: Harvesting in Tax-Deferred Accounts

You cannot harvest losses in IRAs, 401(k)s, or other tax-deferred accounts. Those gains/losses are all tax-free until withdrawal.

Only harvest in taxable brokerage accounts.

FAQ

Q: Can I harvest losses and immediately rebuy a similar fund? A: Yes, as long as it's not "substantially identical." S&P 500 ETF from different providers are usually fine.

Q: Do ETFs vs mutual funds matter for wash sales? A: Yes. Vanguard Total Stock Market ETF (VTI) and Vanguard Total Stock Market Mutual Fund (VTSAX) track the same index but are different securities—no wash sale.

Q: Should I harvest small losses (\u003c$500)? A: Generally yes if it's free (no commissions). Even $500 × 24% = $120 saved.

Q: What if the market recovers during my 31-day wait? A: Risk of being out of the market. Consider buying a similar fund immediately to maintain exposure.

Q: Can I harvest losses in a Roth IRA? A: No. Roth gains/losses are never taxed, so there's no benefit.

Q: Does tax-loss harvesting work for crypto? A: Yes! Crypto is treated as property, so same rules apply.

Related Tools

• Capital Gains Tax Calculator: /calculator/075-capital-gains-tax-calculator-2025
• Tax Bracket Calculator: /calculator/064-tax-bracket-calculator-2025
• Investment Return Calculator: /calculator/05-investment-return-calculator

Conclusion

Tax-loss harvesting is free money if done correctly. The key is consistency—review your portfolio quarterly, harvest losses \u003e$1,000, avoid wash sales, and carry forward losses for future use.

Even modest annual savings of $1,000-$2,000 compound dramatically when reinvested. Over a 30-year investing career, strategic tax-loss harvesting can add $100,000+ to your net worth.

Use the Tax Loss Harvesting Calculator to identify opportunities and maximize your after-tax returns.