Selling a taxable-account fund at a loss and buying a similar one to bank that loss is tax-loss harvesting, and Modera Wealth Management times each harvest against the company stock sales you expect to make. Before any loss sale, the team checks the 61-day window around the trade across every account you own. That means RSU vests, ESPP purchases, dividend reinvestments and IRA contributions, because a purchase in any of them can turn the loss into a wash sale.
Most people look for this help when a deadline is close. Say your fund dropped in the fall and you want the loss on this year's return. A trade has to settle by December 31, and if it doesn't, the loss moves to next year. Worse, an RSU vest or an automatic reinvestment inside the window can cancel the loss without any warning. The January 1099-B then shows a loss your CPA can't use.
Does tax-loss harvesting matter if your big gains are still years away?
Yes, if a taxable account holds roughly $100,000 or more in funds and you expect to sell company stock at a long-term gain within ten years. Realized losses offset realized gains dollar for dollar and carry forward without expiring during your lifetime, so a loss banked at 41 can cancel the gain on company stock sold at 48.
Many people think harvesting is a December chore for bad markets. The rule is wider. A loss can be taken in any month, and it waits until you have a gain to cancel. The IRS tracks it through the carryover on Schedule D.
It works only in a taxable account. Selling at a loss inside a 401(k), 403(b) or IRA creates no deductible loss. That is where asset location comes in: it decides how much there is to harvest. Broad index funds kept in taxable are the harvestable part, so Modera Wealth Management looks at which funds sit in which account before it looks for a loss to sell.
Four steps from lot report to banked loss
Each harvest follows the same order. Nothing is sold until the second step is done.
- Modera Wealth Management pulls every tax lot and its cost basis from the custodian, then sets the lot method to specific identification so the trade sells the lots with the largest loss
- The team maps the 61-day window: RSU vest dates, ESPP purchase dates, dividend reinvestment, Svetlana's IRA contributions and any fund Pavel's 403(b) buys automatically
- A replacement fund is chosen in advance, tracking a different index with similar exposure
- The team places the trade, switches off automatic reinvestment for 31 days and records the loss in the carryforward ledger
Which lines does a finished harvest log show?
A finished harvest is one page in your playbook. It lists the trade date, the fund sold and the lots used. It splits the realized loss into short-term and long-term, names the replacement fund and gives the first day a switch back is allowed (day 31).
It also shows the running carryforward balance and the future company stock sale the loss is earmarked for. The figures go to your CPA in January, before the 1099-B arrives, so the return starts from numbers already checked.
Three years, one $80,000 loss: how Svetlana and Pavel use it
Many clients assume a harvested loss has to be used in the year they take it. It doesn't: whatever goes unused rolls into the next return, and the next. Svetlana and Pavel's three years show the mechanics.
For illustration (hypothetical): Svetlana, 41, is a product director at a chip designer with pre-IPO ISOs. Pavel, 43, teaches high-school music and has a 403(b). They have two children and hold $400,000 of index funds in a joint taxable account.
Year 1: after a market drop they sell funds at an $80,000 loss and buy a similar fund that is not substantially identical. With no gains, $3,000 offsets salary and $77,000 carries forward. Year 2: Svetlana sells long-held company shares for a $50,000 long-term gain. The carryforward cancels it, $3,000 more offsets salary, and $24,000 remains. Year 3: a $40,000 gain arrives; $24,000 is offset and $16,000 is taxed.
Assume 15 percent on gains and 32 percent on salary. Gains offset total $74,000 ($50,000 plus $24,000), so $74,000 × 15 percent = $11,100. Salary offsets total $6,000 ($3,000 twice), so $6,000 × 32 percent = $1,920. The tax saved is $13,020.
Now ask how much the value of the same $80,000 loss depends on the rate their future gains face. It ranges from $1,920 if gains land in 0 percent years to $16,720 at a 20 percent rate.
Be honest about what this is. For the most part, harvesting pushes tax into a later year. The replacement fund carries a basis $80,000 lower, so that gain is waiting when it is sold. The deferral becomes permanent only if those shares go to charity or are held until death, and the carryforward itself dies with the taxpayer and cannot pass to heirs. Markets also offer no floor: the replacement fund can keep sliding, and part of the original investment can be lost.
Year by year
What moves the answer
If you expect to sell company stock at a long-term gain within ten years, bank taxable-account losses of $5,000 or more when they appear. If your gains will mostly fall in 0 percent years, a harvest is worth little beyond $3,000 a year against salary.
| Assumption changed | Tax saved | What drives it |
|---|---|---|
| Base case | $13,020 | $74,000 gains, $6,000 salary |
| Gains taxed at 20% | $16,720 | Higher rate on $74,000 |
| Add 3.8% NIIT on gains | $15,832 | 18.8% on $74,000 |
| Gains land in 0% years | $1,920 | Only salary offsets count |
| No gains for ten years | $9,600 | $50,000 still unused |
Can a capital loss cancel tax on RSU vests or a disqualifying ISO sale?
Not directly. RSU vest income and the spread in a disqualifying ISO sale are wages, so a harvested loss reaches them only through the $3,000 yearly limit the IRS allows against ordinary income. Aim losses at capital gains instead, including later sales of long-held shares.
Here is how the mistake shows up. Someone counts on a $60,000 harvested loss to cancel the spread from a disqualifying ISO sale. It falls apart in March. The CPA's draft return shows the spread on the W-2 as wages, with only $3,000 of the loss used against it. The rest carries forward, and the full tax bill on the spread is still due by the April deadline.
Bring Schedule D to Modera Wealth Management and leave with dated loss candidates
Bring Schedule D and its capital loss carryover worksheet from your most recent return, a lot-level report from each brokerage, the vest and ESPP calendar from HR, and any IRA or 403(b) auto-investment settings. You leave with a list of lots currently below cost, the blocked dates when no matching fund may be bought in any account, and the gains each loss is meant to absorb. One limit: if your taxable account is under about $100,000, or nearly everything you have saved is held in a 401(k), 403(b) or IRA, we'll say so plainly.
A loss banked at 41 can cancel the gain on company stock sold at 48.
What people ask about tax-loss harvesting
Does a loss still count if my IRA buys the same index fund through an automatic monthly contribution?
Not always. If your IRA buys that fund, or one the IRS would treat as substantially identical, in the 30 days on either end of your sale, it can count as a wash sale, and the loss can be denied. Pause automatic buys in every account from 30 days before the sale through 30 days after it, or have the IRA track a different index.
Is it better to harvest a loss this year or hold off and net it directly against next year's company stock sale?
Harvest this year if the loss is available and you will have gains later. A banked loss carries forward without expiring, while a paper loss can vanish if the fund recovers. Waiting only helps if you can't avoid a wash sale in the window.
My Schedule D shows a capital loss carryover; how do I find how much is short-term and how much is long-term?
Use the capital loss carryover worksheet that comes with the Schedule D instructions from the IRS. It splits the carryover into short-term and long-term parts. Your CPA or tax software normally fills it in, and you carry those two figures to next year's return.
Can automatic harvesting at one brokerage clash with trades in my other brokerage account?
Yes. Each brokerage's software sees only its own account, so it can sell at a loss while another account buys the same fund. The wash sale rule counts every account you own, including your spouse's. One person has to watch all accounts together.
Is tax-loss harvesting still worth doing in the five years before retirement?
Yes, if you still hold a taxable account with funds and expect gains, such as from company stock. Losses don't expire, so they can offset gains after you retire. It adds little if your savings sit mostly in a 401(k) or IRA.
Read the rules at the source
How Modera Wealth Management can also help
This is general information, not advice for your specific situation. Investing involves risk, including loss of principal. Nothing here replaces guidance from a tax professional or attorney. Talk to a qualified adviser before you act.