Tax-Loss Harvesting
What a harvested loss is worth today, and what it costs later when the lower basis is eventually sold. Harvesting is a deferral, not a gift — the saving is real but the benefit is the time value of the tax, not the tax itself.
| Years | Value of the deferral |
|---|---|
| 1 | $320.00 |
| 5 | $1,768 |
| 10 | $4,025 |
| 20 | $10,581 |
| 30 | $21,260 |
loss × rate · Immediate.
saving·((1+r)^n − 1) · The time value of the tax.
A clear path from inputs to results.
What a harvested loss is worth today, and what it costs later when the lower basis is eventually sold. Harvesting is a deferral, not a gift — the saving is real but the benefit is the time value of the tax, not the tax itself.
How to use
- Set harvested loss ($).
- Set tax rate on the loss (%).
- Set years until the gain is realised.
- Set return on the deferred tax (%).
- Read the headline metrics, then check the table for the detail.
The formula
Reference: Immediate tax saving and the time value of the deferral, subject to the IRC §1091 wash-sale rule (30 days).
Worked example
At the default inputs
- Harvested loss ($): 20000; Tax rate on the loss (%): 32; Years until the gain is realised: 10; Return on the deferred tax (%): 5
- 1
Immediate saving: $6,400 · Deferred benefit: $4,025 · Cost at exit: $6,400 · Net benefit: $4,025
Immediate saving: $6,400 · Deferred benefit: $4,025 · Cost at exit: $6,400
Interpreting the result
Harvesting $20,000 saves $6,400 now and is worth $4,025 in deferral benefit.
Assumptions & limitations
- The loss is used against a gain at the stated rate.
- The replacement asset is held to the same exit.
Frequently asked questions
Is harvesting free money?
No — it defers tax by lowering the basis, so the benefit is the time value, not the tax.
What about the wash-sale rule?
It applies to substantially identical securities within 30 days, which is why a replacement fund is used.
Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.