Tax Loss Harvesting Benefit Calculator

Optional. Gains already realised this year on positions held for twelve months or less. Leave it blank if there are none and it is read as nothing. These are the most valuable gains to offset, because they are taxed at your ordinary rate rather than at a long-term rate, and offsetting them is where a permanent saving comes from rather than a postponement.

Optional. What the position being sold and replaced is worth, used only to price the cost of trading out of it and back in. Leave it blank and no transaction cost is charged.

Your taxable income for the year apart from the gains entered above: income after the deduction you take, not gross pay. It sets the bracket the annual slot against ordinary income saves at, decides which long-term layer any gains sat in, and is part of what the net investment income tax is measured against.

How long you expect to hold the replacement position before selling it. This is the horizon the extra tax on the lowered basis is discounted over, so a longer wait makes that tax cheaper in today's money and the net benefit larger. Set it to nothing to see the answer with no deferral at all, which is the harshest way to read a harvest.

Optional. The cost of the round trip, selling one position and buying the replacement, as a percentage of what that position is worth. Leave it blank and no cost is charged. On a shallow loss a cost of around a quarter of a percent has been shown to consume the entire benefit, which is why it is worth entering rather than ignoring.

Optional. A single rate standing in for state tax on gains, entered as a percentage. Leave it blank and no state tax is counted, which is right for the nine states that levy none. It is a stand-in and not a state schedule: it is applied to the gains and ordinary income the loss removes, and to the carried-forward amount when it is eventually used.

The loss on the sale, as a positive amount: what the position was sold for, less what it cost. It is the whole of the loss you are realising now, and it is also the amount by which the replacement position starts out with a lower basis, which is why the same figure appears on both sides of the answer.

Optional. The rate you expect to pay when the replacement position is finally sold, entered as a percentage. Leave it blank and the model derives it from today's figures: the long-term layer your income and gains put you in, plus the surtax where it applies, plus any state rate. Setting it above the rate the loss saves at today makes the permanent part of the benefit negative. The net benefit falls as this rate rises, but because the tax at that sale is discounted to today it can stay positive past that point.

The status the return is filed under. It selects the bracket table, the long-term layers and the surtax threshold, and it halves the annual amount of loss that can be set against ordinary income on a separate return.

The return you assume on the money, entered as a percentage. It does two jobs: the tax saved this year is assumed reinvested at it, and the tax owed at the future sale is discounted back at it. A higher figure makes waiting worth more, which is why the benefit is so sensitive to this assumption.

Whether the position was held for twelve months or less when it was sold, which makes the loss short term, or for more than twelve months, which makes it long term. The character decides which gains the loss meets first: a short-term loss is applied to short-term gains before long-term ones, and the other way round. It does not change the annual slot against ordinary income, which either character can fill.

Optional. Gains already realised this year on positions held for more than twelve months. Leave it blank if there are none and it is read as nothing. Offsetting them saves at the rate of the layer they were sitting in, which can be nothing at all if they fell in the zero percent band, in which case the loss is better saved for another year.

Whether to count the net investment income tax, a surtax of three point eight percent charged on the lesser of investment income and the amount by which modified income exceeds a threshold that has never been raised for inflation. Where it applies, offsetting gains saves it as well, and it also raises the rate the model assumes at the future sale.

The tax saved by removing short-term gains from this year, computed as the ordinary tax with those gains and again without them rather than as a flat rate, so a block of gains that straddles a bracket is priced correctly. This is where the largest permanent saving comes from, because the money comes back later at a long-term rate.

State tax saved on the gains and ordinary income the loss removes, at the flat rate entered. It is a stand-in for a state schedule and not a calculation of one.

The values across the top of the grid: the years until the replacement is sold, in steps of two either side of yours and never below none. Read a column to hold the horizon fixed and vary the loss. The middle entry is your own horizon.

The tax saved by the annual slot against ordinary income, at the marginal rate the last of that income is taxed at.

That extra tax discounted back to today at the assumed return. The longer the wait and the higher the return, the smaller it is, which is why the horizon matters as much as the rates do.

The net investment income tax saved by removing gains from a base that was already above the threshold. It is nothing when the threshold is not reached or when the surtax is switched off, and three point eight percent of the gains removed otherwise.

The tax saved by removing long-term gains, priced across the zero, fifteen and twenty percent layers with the gain stacked on top of ordinary taxable income. It is nothing at all when those gains sat in the zero percent layer, which is the case a visitor is most likely to be surprised by.

The body of the grid: the net benefit in today's money, recomputed for every combination of the two axes. One hundred and twenty-one cells, each one the whole calculation run again. It is a component of the table rather than a result on its own.

The five savings above added together: what the harvest is worth in the year of the sale. It leaves out what any carried-forward loss is worth, the tax due when the replacement is sold and the cost of trading, so on its own it can sit above or below the net benefit.

The cost of the round trip, charged today: the position value times the round-trip cost entered. It is nothing when either is left blank.

Machinery, and NOT an input. Excel substitutes each value from the row axis into this cell while it fills the grid; the rest of the time it mirrors the loss realised. Change the loss above, never this: the axis is derived from it, so editing the mirror moves the axis while the table walks and the grid comes out meaningless.

Machinery, and NOT an input. The same for the column axis: Excel substitutes into it while filling the grid, and the rest of the time it mirrors the years until the replacement is sold.

Machinery. Excel requires the formula being tabulated to sit in the grid's top-left corner, where it means nothing to a reader, so it is formatted away. It holds the net benefit in today's money.

The values down the left of the grid: the loss realised, in steps of four thousand either side of yours and never below nothing. Read a row to hold the loss fixed and vary how long the replacement is held. The middle entry is your own loss.

What the carried-forward part is worth in today's money: the annual limit used year after year at the marginal rate plus any state rate, each year discounted at the assumed return, with a remainder in the last year. It is always less than the same amount saved today, and the gap between the two is one of the honest costs of a loss too large to use.

The extra tax due when the replacement position is sold, which is the whole harvested loss taxed again at the rate above, because the replacement started with a basis lower by exactly that loss. It is the reason harvesting is a deferral rather than a saving.

What is left of the loss after this year. It is carried forward with no time limit and keeps its character, so a long-term loss reduces long-term gains first in every later year. It is not lost, but it is postponed, and the calculation below prices that postponement rather than ignoring it.

How much of the loss is set against long-term gains. It saves at the rate of the layer those gains were sitting in, which may be nothing, so a large figure here does not always mean a large saving.

The rate applied to the extra gain at the future sale, either the one you entered or the one derived from today's long-term layers, the surtax where it applies and any state rate. Compare it with the rate on your ordinary income above: the gap between them is the whole of the permanent saving, and the rest is timing.

How many years the carried-forward loss would take to use up if nothing else were ever realised and only the annual slot were available. A figure in double digits is the usual outcome of a large harvest and is the strongest argument for realising gains to absorb it instead.

What the timing alone is worth: the net benefit today less the permanent part. It is positive when the tax pushed into the future is worth more discounted than it costs, and it can be negative, which happens when there is no future tax to defer and the carryforward itself is the thing being waited for.

The tax saved this year plus the carryforward at face value, as a share of the loss realised. It is the rate the loss actually earns before any of it is given back at the sale, and it is useful for comparing one harvest with another rather than for judging whether either is worth doing.

The same net benefit carried forward to the year of the sale at the assumed return. It is the figure to compare with the extra tax due then, and it assumes the tax saved this year was actually reinvested rather than spent.

The whole answer in one figure: the tax saved now, plus what the carryforward is worth in today's money, less the discounted tax at the future sale, less the cost of trading. A negative figure means the harvest costs more than it saves on the assumptions entered. A rate expected at that sale above the rate the loss saves at today makes the permanent part negative, but not necessarily this figure, because the tax at that sale is discounted to today.

The part of the benefit that survives the sale: the tax saved and the carryforward at face value, less the tax that will be due at that sale, and less the cost of trading, with no discounting anywhere. It comes entirely from the difference between the rate the loss saves at today and the rate it is repaid at later, so it is real only when those rates differ.

Reads OK, or explains why the inputs are not valid or why the answer deserves a second look.

How much of the loss is set against ordinary income. The annual amount is fixed by statute at three thousand dollars, or one thousand five hundred on a separate return, and has not been raised since the 1978 tax year; inflated from then it would be several times larger. It is the reason a big loss takes years to use.

How much of the loss is set against short-term gains. These are matched first when the loss is itself short term, and second when it is long term. This is the part of the loss that saves at your ordinary rate.

The rate the last dollar of your ordinary income is taxed at, which is the rate the annual slot saves at and the rate the carried-forward loss is assumed to save at when it is eventually used.