Optimize your portfolio by strategically selling losing positions to offset taxes on gains and income. Track wash sale warnings, calculate tax savings, and manage loss carryforwards.
Tax-loss harvesting allows you to turn investment losses into tax deductions. When you sell a security at a loss, you can use that loss to offset capital gains realized in the same year. If your losses exceed your gains, you can use up to $3,000 to offset ordinary income, with the remainder carried forward to future years.
The IRS forbids claiming a loss on a sale if you buy a "substantially identical" security within 30 days before or after the sale. To maintain your market exposure while harvesting losses, you can swap to a similar, but not identical, ETF.
| Asset Class | Original Fund | Replacement Fund Idea |
|---|---|---|
| S&P 500 | SPY or VOO | IVV (iShares Core S&P 500) or VTI (Total Stock Market) |
| Total Stock Market | VTI (Vanguard) | ITOT (iShares Core S&P Total US Stock Market) |
| Nasdaq 100 | QQQ | QQQM or VUG (Vanguard Growth ETF) |
| Developed Markets | VEA (Vanguard) | IEFA (iShares Core MSCI EAFE) |
| Emerging Markets | VWO (Vanguard) | IEMG (iShares Core MSCI Emerging Markets) |
Tax-loss harvesting is an investment strategy where you sell securities at a loss to offset capital gains or ordinary income. This can lower your overall tax liability while allowing you to reinvest the proceeds into similar, but not substantially identical, assets.
The IRS wash sale rule prevents you from claiming a tax deduction for a security sold in a wash sale. A wash sale occurs if you sell a security at a loss and buy the same or a "substantially identical" security within 30 days before or after the sale.
If your capital losses exceed your capital gains, you can use up to $3,000 of the excess loss to offset ordinary income per year ($1,500 if married filing separately). Any remaining losses can be carried forward to future tax years indefinitely.
Short-term capital gains apply to assets held for one year or less and are taxed at ordinary income tax rates. Long-term capital gains apply to assets held for more than one year and benefit from lower tax rates (typically 0%, 15%, or 20%).
Yes, if your net capital losses exceed the $3,000 annual limit for offsetting ordinary income, you can carry forward the remaining amount to offset gains or income in future tax years indefinitely.
Tax and retirement account information based on current IRS/CRA regulations and guidelines. Consult a qualified tax professional for advice specific to your situation.
Westmount Fundamentals. "Tax-Loss Harvesting Calculator." westmountfundamentals.com/tax-loss-harvesting-calculator, 2026.