Step-by-step · 3 min read
Tax-loss harvesting
Selling an investment at a loss and buying a similar one keeps you invested while banking a loss that offsets your gains. Losses beyond your gains offset up to $3,000 of other income a year, and the rest carries forward with no expiration.
- Who it fits
- Investors with taxable brokerage accounts.
- Figures
- 2026 tax year
The key rule
A wash sale happens if you buy the same or a substantially identical investment within 30 days before or after the sale. The loss is then postponed and added to the basis of the new shares.
5 steps
Find positions below cost
Check unrealized losses in your taxable account, especially after a market drop. Look at individual lots, not just the total position.
Sell and swap
Sell the losing lots and buy a similar but not identical fund, for example a fund tracking a different index of the same market.
Check every account for the 30-day window
Purchases in your IRA, a spouse's account, dividend reinvestments, and RSU or ESPP purchases of the same stock all count.
Use losses against the right gains
Short-term losses offset short-term gains first. We apply them in the order that saves the most.
Log the carryforward
Unused losses carry forward indefinitely.
Example
A swap
You hold an S&P 500 fund bought for $60,000, now worth $50,000. You sell it and buy a total US market fund. You stay invested and bank a $10,000 loss that offsets $10,000 of gains from selling RSU shares.
Common mistakes
- Selling company stock at a loss within 30 days of a vest or ESPP purchase.
- Turning off dividend reinvestment is often needed during the 30-day window.
Key dates
- December 31
- Last trade date for losses to count this year.
Questions we hear
Does harvesting just postpone tax?
Partly. Your new shares have a lower basis, so more gain later. But the loss saves tax now, losses used against short-term gains or ordinary income save at higher rates, and shares held until death or given to charity may never be taxed.
Can I harvest in a robo-advisor account?
Many do it automatically. Watch for wash sales with your other accounts.
General education for TaxSquad clients, not advice for your situation. Rules and figures change. Talk to us before acting on this guide.