Realize losses to offset gains.
Take a loss on paper, use it to wipe out a gain on paper, send less money to the tax authority. The mechanics are simple; the rules around replacement (wash sales) are where things go wrong.
Built and reviewed by Stephen Omukoko Okoth
Mathematical Economist · ex-Morgan Stanley FI · Equilar
Inputs
Your situation
Compliance
Wash sale window
Don't repurchase a substantially identical security within 31 days before or after the loss sale. Doing so disallows the loss for tax purposes — it's added to the new position's cost basis instead. Either wait 31+ days, or buy a similar-but-distinct replacement (e.g., swap one S&P 500 ETF for a total-market ETF). Different countries have different rules; check local guidance.
Verdict
$ 3,000 total benefit
$ 3,000 this year + $ 0 from carryforward
The harvest doesn't change your before-tax position — you still own a similar replacement holding the same risk exposure. It just changes when the tax bill arrives. That deferred tax is real money compounding inside your account.
Result
The breakdown
Loss offsetting gains
$ 15,000
Tax saved (gains)
$ 3,000
Loss against ordinary
$ 0
Tax saved (ordinary)
$ 0
Carried to next year
$ 0
Used in future filings
Total this-year savings
$ 3,000
Common questions
What is tax-loss harvesting?
Selling a position at a loss to realize the loss on paper, then using that loss to offset capital gains elsewhere. The result: lower tax bill this year while keeping your overall investment exposure roughly intact (by buying a similar-but-not-identical replacement).
What is the wash-sale rule?
If you sell at a loss and buy the same security (or 'substantially identical' one) within 30 days before or after, the IRS disallows the loss for the current year. The disallowed loss adds to the cost basis of the new position. Wait at least 31 days before repurchasing — or buy a different but correlated security (e.g., swap one S&P 500 ETF for another).
How big is the actual benefit?
It depends on your tax rate and how much of the loss you can use. The benefit is real but bounded — capped at $3,000/year in losses you can deduct against ordinary income (US), with the remainder carried forward. Don't let the tax tail wag the investment dog.
Does it work in my country?
The mechanics vary. The US wash-sale rule is 30 days; the UK has a 30-day 'bed and breakfasting' rule; Kenya doesn't have a formal wash-sale rule but loss recognition rules differ. The calculator's logic applies anywhere capital losses can offset capital gains; check local rules for replacement timing.