Tax-Loss Harvesting

Tax-Loss Harvesting

Turn a list of holdings or tax lots the user pastes or uploads into a ranked, wash-sale-aware harvesting plan: which losses are worth realizing, how much tax they offset, and which sales would trip the wash-sale rule.

Disclaimer: This is informational analysis, not tax advice. Tax rules vary by jurisdiction and change; the wash-sale rule now reaches digital assets for 2025 sales. Have a qualified tax professional confirm anything before you act on it. Every deliverable carries this disclaimer.

Step 1: Get the lots

You need, per position: ticker or token, acquisition date, cost basis, and current market value (or current price and quantity). Ask for the marginal tax context if the user wants a savings estimate: their short-term (ordinary) rate and long-term capital-gains rate, plus any realized gains already booked this year. Work only from the lots provided; do not invent basis or dates.

Step 2: Classify each lot

For every lot compute the unrealized gain or loss and the holding period:

unrealized = current_value - cost_basis        # negative is a loss
days_held  = today - acquisition_date
term       = long-term if days_held >= 365 else short-term

Only losses are harvest candidates. Note lots that are close to crossing 365 days -- harvesting just before the cross locks in a short-term loss (which offsets higher-taxed short-term gains), and that timing can matter.

Step 3: Rank the candidates

Score each loss lot so the user works the highest-value ones first:

1. Loss magnitude -- the raw dollar loss; larger loss, larger potential offset.
2. Tax value -- abs(loss) x applicable marginal rate, using the short- or long-term rate that matches what the loss will offset.
3. Urgency -- days until the lot crosses into long-term (a reason to act now or wait), and proximity to year-end for "use it or lose it".
4. Wash-sale risk -- whether harvesting this lot is blocked or complicated by recent or planned purchases of the same asset (Step 5).

Step 4: Net the gains and losses, then the carryforward

Apply the netting order and report the result:

• Short-term losses first offset short-term gains; long-term losses first offset long-term gains.
• A remaining net loss in one category then offsets the other category.
• If total net loss still exceeds gains, up to $3,000 per year ($1,500 married filing separately) is deductible against ordinary income; the rest carries forward indefinitely. Track and state the carryforward amount.

Step 5: Wash-sale check (IRC Section 1091)

If a loss is realized and a substantially identical asset is acquired within the 61-day window (30 days before the sale, the sale day, and 30 days after), the loss is disallowed and added to the basis of the replacement lot. This now applies to digital assets for sales on or after January 1, 2025.

Day -30 ......... Day 0 (sale at a loss) ......... Day +30
  |-- purchases here trip it retroactively --|-- and prospectively --|

For each harvest candidate, check the user's other lots and stated intentions for a same-asset buy inside the window. Flag any wash sale, state the disallowed amount and the safe re-entry date (sale date + 31 calendar days), and note edge cases the user should raise with their preparer: wrapped vs unwrapped tokens, the same token across chains, or a fund vs its underlying. "Substantially identical" is a judgment call -- surface it, do not rule on it.

Guardrails

• Only the lots given. No basis, date, or price is invented; if a lot is missing data, ask.
• Estimates, labeled. Tax-savings figures are estimates that depend on the user's full return.
• Flag, do not rule. Wash-sale "substantially identical" and jurisdiction questions go to the preparer; the skill surfaces the risk and the dates.
• Not tax advice. The disclaimer is on every deliverable.

Zeplik output presentation

Present one polished artifact: a two-line bottom line (how much loss is harvestable and the single biggest wash-sale caution), a ranked candidate table (asset, term, loss, estimated tax value, wash-sale flag), the netting and carryforward summary, then the disclaimer. Keep process commentary to one line.