Calculate tax savings from harvesting investment losses against gains with wash sale rules, carryover limits, and optimal pairing.
Selling a losing investment is only worth it if you know what the loss is actually worth, and most people guess wrong: the loss does not save you its full value, and the wash sale rule can silently erase it. The tool nets your realized gains and losses for the year, applies the $3,000 annual cap on deductions against ordinary income, carries the remainder into future years, and flags any repurchase inside the 30-day wash sale window. It also shows which losses to realize first, because a loss offsets short-term gains taxed at ordinary rates before it touches lower-taxed long-term gains.
A concrete input and expected output from the current implementation.
Input
Long-term gains: $6,000 Long-term losses: $10,000 Short-term gains: $0 Short-term losses: $0 Filing status: Single Taxable income: $80,000
Expected output
Net long-term loss: $4,000. Deductible against ordinary income this year: $3,000 at your 22% marginal rate = $660 tax saved. Carryover to future years: $1,000 (worth about $220 at the same rate). Wash sale check: no repurchase of the sold positions within 30 days of the sale - no issues.
The $10,000 loss first cancels the $6,000 long-term gain, leaving a $4,000 net loss. Only $3,000 can be deducted against ordinary income per year, so the saving is $3,000 times the 22% marginal rate for a single filer at $80,000 taxable income, and the remaining $1,000 carries forward.
Short-term losses first offset short-term gains and long-term losses offset long-term gains; a net loss of one type then offsets gains of the other. The tool applies the remaining net loss against ordinary income up to $3,000 per year ($1,500 married filing separately) and carries the rest forward indefinitely, using short-term carryovers first. Tax saved is the deducted amount times your marginal ordinary rate.
A loss is disallowed if you acquire substantially identical securities 30 days before through 30 days after the sale - a 61-day window. The tool flags any harvest with a repurchase inside the window, counting both sides of the sale date. The disallowed loss is not forfeited: it is added to the replacement shares' cost basis and comes back when you eventually sell those shares.
Not for 30 days after the sale. Buying substantially identical shares any time from 30 days before to 30 days after the sale triggers the wash sale rule, and the loss is disallowed for this year. It is not gone - it attaches to the new shares' basis - but if you want the deduction now, wait 31 days after selling.
They carry forward to future years with no expiration. Carryover losses offset future capital gains first, then up to $3,000 of ordinary income per year, with short-term carryovers used before long-term ones. A big harvest can take years to pay off at that pace, which is worth weighing before you sell.
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