Tax-Loss Harvesting

Tax-loss harvesting works by selling securities at a loss to offset capital gains and up to $3,000 of ordinary income. It estimates tax savings by computing realized YTD gains/losses, incorporating carryforwards, and applying marginal tax rates to the net results.

To avoid wash sales when replacing harvested securities, select replacement securities with similar market exposure that are not substantially identical, then validate a 30-day lookback and forward window across the entire household, including DRIPs.

You can calculate estimated tax savings from harvesting unrealized losses by computing realized gains and losses year-to-date, applying capital loss carryforwards, and using marginal ordinary income and capital gains rates, including the $3,000 net loss deduction.

The best way to maintain market exposure during tax-loss harvesting is to execute a replacement trade plan using similar but not substantially identical ETFs, ensuring continuous market participation while capturing tax losses and tracking post-harvest positions.

Tax-loss harvesting works for both year-end tax planning and ongoing taxable-account rebalancing workflows. It continuously scans for unrealized losses, prioritizes short-term and large percentage drops, and produces an execution plan with replacement rationales.