See how tax-loss harvesting—automatically selling investments at a loss to offset capital gains—can boost your after-tax returns.
What this calculator does
Tax-loss harvesting estimates the value of using realized losses to reduce tax on realized gains. The projection starts with a portfolio split 60% stocks and 40% bonds. Each year, it assumes 25% of stock holdings and 10% of bond holdings are sold, with 30% of each sale treated as capital gain. The taxable gain is multiplied by the stated capital-gains tax rate. The portfolio grows at the expected return after that tax cost. Harvesting restores the efficiency multiplier times the tax rate times the lesser of taxable gains or 3% of balance. The restored amount compounds for ten years.
Emerging technology stocks often produce uneven returns, with sharp rallies followed by wide drawdowns. Companies in AI, semiconductors, space, robotics, and energy innovation may trade at high valuations while spending heavily on data centers, fabs, launches, or manufacturing capacity. Some remain unprofitable and may issue shares to fund operations. A taxable account can therefore generate gains from trimming winners even while other positions show losses. Harvesting can turn losses into a direct tax offset.
The comparison separates expected return from after-tax result. A high expected return does not automatically overcome recurring taxable turnover, when an investor regularly replaces one volatile holding with another. The ten-year difference shows the dollar value of taxes retained in the portfolio, plus the percentage lift over the no-harvesting balance. It can frame taxable-account turnover, position sizing, and thematic-fund use. It does not fully measure trading costs, bid-ask spreads, wash-sale restrictions, or tax law.
Read the results as a scenario rather than a forecast. The expected return is applied every year, but actual emerging-technology holdings can move abruptly. A larger efficiency multiplier means more usable losses are captured, not that losses are desirable or guaranteed. Compare tax savings with ending-balance increase, because the latter includes compounding on retained cash. Also note the model assumes same tax rate and fixed stock and bond turnover. Holdings and distributions can differ.
How to use it
- Set the value of your taxable investment portfolio.\n2. Choose an expected annual return and the capital gains tax rate applicable to the gains you are modeling.\n3. Adjust harvesting efficiency: a lower value represents fewer usable losses, while a higher value represents more effective use of available opportunities. This is a model multiplier, not a guaranteed success rate.\n4. Select Calculate Tax Impact to compare projected portfolio values with and without harvesting over a fixed 10-year period.\n\nThe model assumes a 60% stock and 40% bond portfolio, fixed turnover and gain assumptions, and a cap on harvestable losses. The displayed savings are the difference in projected ending values, not a guaranteed tax refund. Wash-sale restrictions, future tax on eventual sales, state taxes and your individual tax situation are not fully modeled. Use this for illustration, not tax advice.
When to use it, and when it misleads
Use the tax loss harvesting calculator when a taxable brokerage portfolio generates recurring realized gains. This can occur in a broad stock fund that distributes gains, a thematic ETF that rebalances, or a portfolio that periodically trims concentrated positions after advances. Turnover matters when gains are realized, not merely on paper. Entering an applicable capital-gains rate shows why identical pre-tax returns can leave investors with different after-tax results.
It also earns its keep when assessing a high-turnover allocation to emerging-technology equities. A robotics, semiconductor, space, or digital-asset equity ETF may replace constituents after price moves, creating taxable events. Individual positions can produce a similar result when a company’s valuation changes quickly and the portfolio is rebalanced. The projected tax drag puts a dollar estimate on an often-overlooked cost of turnover. It helps distinguish a strategy’s reported return from the amount remaining invested after taxable sales.
Use it as a planning check when a portfolio holds volatile, unprofitable growth companies alongside assets with embedded gains. These holdings can fall sharply on earnings or financing announcements. Selling a losing position can create an offset while maintaining chosen exposure through a replacement that is not substantially identical. Use the efficiency multiplier as a range: lower values reflect few usable losses or delayed trades, while higher values assume frequent loss realization. The ten-year result illustrates the compounding value of tax savings left invested.
The calculation can mislead if read as a forecast of harvestable losses. Expected return and turnover do not determine whether losses exist when trades occur. A rising market can generate taxable gains but little loss inventory. A severe drawdown may create losses, yet realizing them can disrupt an investment thesis. The multiplier compresses market path, trade timing, bid-ask spreads, and replacement-security choice into one number. Treat the output as a sensitivity estimate, not a dependable annual tax benefit.
It also omits rules that can materially change the outcome. Losses offset gains first, and only a limited amount of net capital loss can reduce ordinary income annually; unused losses may carry forward, changing timing. Wash-sale rules can defer a loss when the same or a substantially identical security is bought within the restricted period. State taxes, short-term versus long-term rates, fund distributions, account type, trading costs, and cash flows are absent. Harvesting also does not always erase tax permanently: lowering a holding’s cost basis can increase taxable gain when it is sold. The balance difference is not a complete after-tax wealth estimate.
Questions people ask
How does a tax-loss harvesting calculator work?
It begins with a portfolio assumed to hold 60% stocks and 40% bonds. Each year, 25% of the stock allocation and 10% of the bond allocation turn over, with 30% of each sale treated as capital gain. The gain is multiplied by the selected tax rate, and that tax reduces the amount left to compound. The harvesting case then adds an offset equal to the efficiency multiplier times the tax rate times the smaller of taxable gains or 3% of the balance.
Can tax-loss harvesting increase my after-tax return?
Potentially, because realized losses can offset realized capital gains and reduce current tax paid in a taxable account. The calculation treats that reduction as an amount retained in the portfolio, where it can compound over the remaining years. It does not assume a higher market return or eliminate investment losses. Results can differ when losses are unavailable, gains occur in different tax categories, or taxes are deferred rather than permanently avoided.
What does harvesting efficiency mean?
The harvesting efficiency multiplier represents the share and quality of usable losses relative to the model’s potential tax offset. A value below 1.0x reflects imperfect opportunities, constraints on realizing losses, or losses that cannot be used promptly. A 1.0x setting applies the model’s full calculated offset, while values above 1.0x represent an assumption that harvested losses are especially effective. It is not a forecast of a manager’s performance or a measure of market volatility.
Does the calculator account for wash-sale rules?
No. The projection does not test the wash-sale rule, which can defer a loss if substantially identical securities are acquired within the relevant window around the sale. It also does not model replacement holdings, trade dates, cost lots, or separate short-term and long-term gains. These details can materially change whether a realized loss is currently usable. A thematic ETF and a closely related semiconductor fund, for example, may require careful tax analysis before using one as a replacement.
Why does the calculator assume stock and bond turnover?
The turnover assumptions create taxable sales even when the portfolio’s overall expected return is positive. The model applies 25% annual turnover to the 60% stock allocation and 10% to the 40% bond allocation, then treats 30% of sale proceeds as capital gains. Higher turnover creates more current tax drag and more potential losses to offset it. Actual bond funds may distribute interest taxed as ordinary income, which this capital-gains model does not include.
What capital gains tax rate should I use?
Use a rate that reflects the marginal tax treatment expected for realized gains in the account being modeled, rather than the portfolio’s headline return. Federal long-term and short-term gains can face different rates, and state taxes may also matter. The calculator applies one constant rate to every modeled annual gain, so it cannot capture brackets, tax-law changes, loss carryforwards, or a mix of gain types. A range of plausible rates can show how sensitive the estimated savings are to tax assumptions.