Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A realized loss offsets gains this year, and any leftover loss carries forward to future years rather than disappearing, but harvesting a loss and immediately buying back the identical or a substantially similar security within the wash-sale window disallows the loss entirely, turning what looked like a tax benefit into nothing.
Before you rely on it
What to check
Confirm the replacement investment, if any, isn't substantially identical to the one sold, and that enough time has passed to clear the wash-sale window before repurchasing.
The common error
Where people go wrong with tax-loss harvesting calculator
Selling a losing position to harvest the tax loss, then immediately repurchasing the identical security. The wash-sale rule disallows the loss in that situation, eliminating the exact benefit the harvesting was meant to capture.
Sensitivity evidence
How realized capital loss changes the estimated current tax benefit
| Realized capital loss | Estimated current tax benefit | Loss carried forward |
|---|---|---|
| $9,600 | $2,304 | $0.00 |
| $10,800 | $2,592 | $0.00 |
| $12,000worked example | $2,640 | $1,000 |
| $13,200 | $2,640 | $2,200 |
| $14,400 | $2,640 | $3,400 |
Every input, tested
Which input moves the estimated current tax benefit most
| Input | Tested from | To | Estimated current tax benefit at each end | Swing |
|---|---|---|---|---|
| Estimated blended tax rate | 22.0% | 26.0% | $2,420 to $2,860 | $440 (17%) |
| Capital gains offset | $7,200 | $8,800 | $2,448 to $2,832 | $384 (15%) |
| Ordinary-income offset used | $2,700 | $3,300 | $2,568 to $2,712 | $144 (5.5%) |
| Realized capital loss | $10,800 | $13,200 | $2,592 to $2,640 | $48 (1.8%) |
Two variables at once
Estimated current tax benefit by realized capital loss and capital gains offset
| Realized capital loss \ Capital gains offset | $6,400 | $8,000 | $9,600 |
|---|---|---|---|
| $9,600 | $2,256 | $2,304 | $2,304 |
| $10,800 | $2,256 | $2,592 | $2,592 |
| $12,000 | $2,256 | $2,640 | $2,880 |
| $13,200 | $2,256 | $2,640 | $3,024 |
| $14,400 | $2,256 | $2,640 | $3,024 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Realized capital loss | $12,000 |
| Capital gains offset | $8,000 |
| Ordinary-income offset used | $3,000 |
| Estimated blended tax rate | 24.0% |
| Estimated current tax benefit | $2,640 |
| Loss carried forward | $1,000 |
Where the inputs come from
Realized capital loss is the loss from selling an investment below your cost, capital gains offset is the gains you have realized that year, and the ordinary-income offset is the part of any remaining loss you can deduct against other income, limited to $3,000 a year for most filers. The blended tax rate is the rate you would have paid on the gains and income being offset. Get the numbers from Form 1099-B.
When the result stops applying
The wash-sale rule disallows the loss if you buy the same or a substantially identical security within 30 days before or after the sale. Short-term and long-term gains and losses net within their own category first. The strategy applies only to taxable accounts, not IRAs or 401(k)s. State tax rules can differ.
What to compare it with
Use the capital gains tax calculator to see the tax on remaining gains, and the after-tax investment return calculator for the wider effect. Keep track of the replacement fund you use during the 30-day window, and confirm it is not substantially identical. A tax professional can confirm how your loss nets.
People also ask
Frequently asked questions
What is the wash-sale rule?
It disallows a loss if you buy the same or a substantially identical security within 30 days before or after selling at a loss. The disallowed loss adds to the new purchase's cost basis.
How much loss can I deduct against ordinary income?
Up to $3,000 a year, or $1,500 if married filing separately. Any extra loss carries forward to future years without expiring.
Does tax-loss harvesting work in an IRA?
No. Losses inside tax-advantaged accounts such as IRAs are not deductible, so harvesting applies only to taxable brokerage accounts.