How Much Can Tax-Loss Harvesting Save?
Tax-loss-harvesting savings cannot be estimated from portfolio size alone. Two $1 million portfolios can have completely different lots, gains, contributions, volatility, and tax rates.
The useful calculation starts with a realized loss that can actually be used.
Basic Current-Tax Estimate
When a harvested loss offsets a taxable capital gain, a simplified current federal estimate is:
usable loss × tax rate on the gain being offset
Examples before state tax and future basis effects:
- A $20,000 loss offsets long-term gain taxed at 15%: $3,000 of current federal tax deferred.
- A $20,000 loss offsets long-term gain taxed at 20% plus NIIT: up to $4,760 under simplified assumptions.
- A $20,000 short-term loss offsets short-term gain taxed at 32%: $6,400 before any applicable NIIT.
The Schedule D netting rules determine what the loss actually offsets; an investor cannot freely assign it to the highest-rate gain.
What If There Are No Gains?
If total capital losses exceed total capital gains, an individual may generally deduct up to $3,000 of net capital loss against other income and carry the remainder forward.
At a 24% marginal rate, a $3,000 deduction could reduce current federal tax by $720. The unused loss may be valuable later, but that value depends on when and how it is used.
Why Portfolio-Size Tables Fail
A larger account may contain more lots, but it does not guarantee more losses. A new portfolio bought after a decline may have no loss lots. An older portfolio may contain mostly large gains. Regular contributions can create new high-basis lots, while earlier harvesting resets basis and changes future opportunities.
Do not assume that a fixed percentage of assets will be harvested every year.
Include the Costs and Future Tax
Subtract or model:
- Bid-ask spreads and fees.
- Replacement tracking difference.
- Time out of the intended investment.
- State tax treatment.
- The lower basis and future gain in the replacement.
- Professional or software cost.
Tax-loss harvesting often produces deferral, not permanent savings. Deferral can still be valuable because money remains invested longer, but the value depends on horizon and exit assumptions. See how tax deferral can support long-term compounding for the timing tradeoff, and what tax-loss harvesting changes—and what it doesn't for the related limits on what a harvested loss can and cannot change.
A Better Range
Use three scenarios:
- No current gain: only the permitted net-loss deduction is used now; the rest carries forward.
- Known gain: the loss offsets a documented short- or long-term gain at the applicable rate.
- Permanent-savings event: future gain is realized at a lower rate, donated, or potentially eliminated through a basis adjustment under then-current law.
Report each scenario separately rather than collapsing them into one annual percentage.
Try the tax-loss-harvesting calculator and read is tax-loss harvesting worth it? for a decision framework.
Bottom Line
The savings estimate is the usable loss multiplied by the tax rate it actually offsets, reduced for costs and future tax. Portfolio size is context—not a promise of how many losses will appear.
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