Tax-Loss Harvesting Estimator

Selling a loser banks a capital loss and saves tax now. But it lowers your cost basis, so much of the saving is deferred, not erased. This estimates the honest, net value.

Inputs

Loss to harvest

Gains to offset

Ordinary tax rate

Cap-gains rate

State tax rate

Years until sale

yrs

Expected return

Results

Tax saved this year

Loss carried forward

Net benefit (today's $)

Value kept per $ loss

Where your loss goes, and what you actually keep

The economics, in today's dollars

Net benefit vs how long you defer

The longer until you sell, the more the deferred tax shrinks in present value. The dot marks your horizon.

30-day wash-sale rule

Buying a substantially identical security within 30 days before or after the sale disallows the loss, in any of your accounts, including automatic reinvestment and IRAs. A different ticker alone is not enough. IRS Publication 550.

Deferral, not free money

Your basis drops by the harvested loss, so a bigger gain is taxed when you eventually sell.

Where the real value is

Time value of investing the up-front saving, plus offsetting high-rate income now vs low-rate gains later.

Estimate only

Ignores AMT, net investment income tax and the long/short-term split within gains; assumes the replacement recovers. Not tax advice.

The net-benefit scenario counts current-year tax savings only. Carryforward is shown separately with no assumed use date or present value. The future basis-recovery tax assumes the full modeled gain is taxable and no carryforward offsets it; actual carryforward usage can lower that cost. Filing status is assumed single or married filing jointly ($3,000 ordinary-income offset).

About this tool

Tax-loss harvesting sounds like free money; this calculator prices what it is actually worth. It nets the up-front tax saving you can reinvest against the larger future tax bill from a lowered cost basis, adds the genuine rate arbitrage on the $3,000 ordinary-income offset, and respects the wash-sale rule.

The honest summary is that harvesting is mostly deferral, not elimination: you are borrowing from a future tax bill at 0% interest and investing the loan. That is genuinely valuable, especially in high brackets, but it is a much smaller edge than the marketing around it suggests.

Frequently asked questions

What is the wash-sale rule?

If you sell a security at a loss and buy the same or a substantially identical one within 30 days before or after, the IRS disallows the loss. Harvesters typically swap into a similar but not identical fund to stay invested.

How much is tax-loss harvesting actually worth?

Studies and simulations generally land in the range of a few tenths of a percent of portfolio value per year, front-loaded in volatile markets and in high tax brackets. Meaningful, but no substitute for fees and allocation.

Does it work inside an IRA or 401(k)?

No. Losses in tax-advantaged accounts are not deductible, so harvesting only applies to taxable brokerage accounts.

Key terms: Tax-loss harvesting Arbitrage