Tax Loss Harvest Calculator

Tax-loss harvesting is the practice of deliberately selling an investment that's down to turn a paper loss into a real, deductible one — then rebuying similar (but not identical) exposure so your portfolio barely changes. The realized loss does real work on your tax return: it cancels out capital gains dollar-for-dollar, and once gains are exhausted it can offset up to $3,000 of ordinary income per year, with anything left over carried forward to future years indefinitely. That cuts this year's tax bill. But there's no free lunch hiding here: selling and rebuying resets your cost basis down to the current price, so when you eventually sell the replacement, the gain — and the tax on it — is correspondingly larger. Harvesting is therefore usually a tax DEFERRAL, not tax elimination. The reason it still pays is the time value of money: the tax you save now is dollars you keep invested and compounding for years, while the offsetting cost stays frozen until you sell. Even at identical tax rates you come out ahead, as if the IRS handed you an interest-free loan. The benefit grows when you harvest against income taxed at a high rate today and pay a lower rate later (or never, thanks to the step-up in basis at death), and it shrinks — even reverses — if your future rate is higher. The one rule that can erase everything is the wash sale: if you buy the same or a 'substantially identical' security within 30 days before or after the sale, the IRS disallows the loss entirely. The discipline is to harvest the loss, swap into a similar-but-not-identical fund to keep your market exposure, and wait out the window.

Free and interactive — no sign-up, nothing to install. Read the full lesson for the plain-language explanation.