TLH Examples: 2026 Tax-Loss Harvesting Guide

TLH Examples: 2026 Tax-Loss Harvesting Guide

TLH Examples: 2026 Tax-Loss Harvesting Guide for High-Net-Worth Investors

Tax-loss harvesting (TLH) is one of the most powerful tools available to high-net-worth investors, family offices, and cross-border executives in 2026. TLH examples show how selling underperforming assets strategically can offset capital gains and slash your tax bill — all within a well-designed tax strategy. With the One Big Beautiful Bill Act (OBBBA) now reshaping the planning landscape, understanding TLH examples has never been more critical. This information is current as of 3/23/2026. Tax laws change frequently. Verify updates with the IRS at IRS.gov if reading this later.

Table of Contents

• Key Takeaways
• What Is Tax-Loss Harvesting and How Does It Work?
• What Are the Best Basic TLH Examples for 2026?
• How Does the Wash Sale Rule Affect Your TLH Strategy?
• What Are Advanced TLH Examples for High-Net-Worth Investors?
• How Does the OBBBA Change TLH Planning in 2026?
• What Mistakes Should You Avoid When Using TLH Examples?
• Uncle Kam in Action: $1.2M Portfolio Rescue
• Related Resources
• Next Steps
• Frequently Asked Questions

Key Takeaways

• TLH examples show you can offset capital gains dollar-for-dollar using realized losses in 2026.
• Up to $3,000 per year in net capital losses can offset ordinary income under IRS rules.
• The wash sale rule (IRC Section 1091) bans repurchasing the same or substantially identical security within 30 days.
• The OBBBA raised the estate exemption to $15M per individual ($30M for couples), creating new TLH coordination opportunities.
• High-net-worth investors in the 20% capital gains bracket also face a 3.8% NIIT, making TLH savings even larger.

What Is Tax-Loss Harvesting and How Does It Work?

Tax-loss harvesting is a deliberate investment move. You sell an asset that has declined in value. You then use that realized loss to cancel out gains elsewhere in your portfolio. The result is a lower tax bill — without requiring you to permanently exit your investment position.

For high-net-worth investors in 2026, TLH is particularly valuable. Those in the top capital gains bracket pay 20% on long-term gains. On top of that, the net investment income tax (NIIT) adds another 3.8% for individuals with modified adjusted gross income above $200,000 (single) or $250,000 (married filing jointly). Together, that is a combined 23.8% effective rate on long-term capital gains — making every dollar of harvested loss worth nearly 24 cents in saved federal taxes.

How the Netting Process Works

The IRS requires you to net capital gains and losses in a specific order before applying any offset. Here is how that netting works:

• First, net all short-term gains against all short-term losses.
• Next, net all long-term gains against all long-term losses.
• Then, combine the short-term and long-term net results.
• If you have a net loss, you can deduct up to $3,000 against ordinary income annually.
• Any remaining net loss carries forward indefinitely to future tax years.

You report capital gains and losses on IRS Form 8949 and then transfer the totals to Schedule D of your Form 1040. For more detail on the rules, see IRS Publication 550, Investment Income and Expenses.

Short-Term vs. Long-Term: Why Holding Period Matters

Not all losses are equal. Short-term losses (from assets held one year or less) first offset short-term gains, which are taxed at ordinary income rates up to 37% in 2026. Long-term losses (from assets held over one year) first offset long-term gains taxed at 0%, 15%, or 20%.

Therefore, a short-term loss is technically more valuable. It offsets income taxed at a higher rate. However, most sophisticated investors benefit from strategic use of both types. Furthermore, the ability to carry unused losses forward indefinitely makes TLH a multi-year planning tool, not just a year-end tactic.

What Are the Best Basic TLH Examples for 2026?

Let’s walk through the most common TLH examples step by step. These scenarios apply directly to high-net-worth investors and business owners who manage taxable investment accounts in 2026.

TLH Example 1: Simple Gain-Loss Offset

Consider an investor named Sarah. She holds two positions in her taxable brokerage account in 2026.

• Position A: Tech ETF purchased for $200,000, now worth $350,000 (a $150,000 unrealized long-term gain).
• Position B: A sector fund purchased for $100,000, now worth $50,000 (a $50,000 unrealized long-term loss).

Sarah wants to sell Position A to rebalance her portfolio. Without TLH, she would owe taxes on the full $150,000 long-term gain. At 20% plus 3.8% NIIT, her federal tax bill would be $35,700.

However, if Sarah first sells Position B, she realizes a $50,000 long-term loss. She then sells Position A. The $50,000 loss offsets $50,000 of the $150,000 gain. Now she only owes taxes on $100,000 of net gain. Her federal tax bill drops to $23,800 — a savings of $11,900. She can then immediately reinvest the Position B proceeds into a similar (but not substantially identical) fund to maintain her market exposure.

TLH Example 2: Offsetting Ordinary Income

Now consider Marcus, a family office manager with no capital gains this year. He holds a bond fund that has declined by $80,000. He sells the fund and realizes the $80,000 loss.

Since there are no capital gains to offset, the IRS allows Marcus to deduct $3,000 of the net loss against his ordinary income in 2026. The remaining $77,000 carries forward to 2027 and beyond — indefinitely — until fully absorbed by future capital gains or the $3,000 annual ordinary income deduction.

If Marcus is in the 37% ordinary income bracket, that $3,000 deduction saves him $1,110 in 2026. More importantly, the $77,000 carryforward is a future asset. If he realizes a business sale gain next year, that carryforward shields $77,000 of profit from tax. At 23.8% combined, that is over $18,000 in future savings — from one disciplined harvest.

2026 Tax Savings Table: TLH Examples at Different Gain Levels

Table assumes 20% long-term capital gains rate + 3.8% NIIT = 23.8% combined federal rate. State taxes are additional. Verify current rates at IRS Topic 409, Capital Gains and Losses.

How Does the Wash Sale Rule Affect Your TLH Strategy?

The wash sale rule is the single most important compliance guardrail in all TLH examples. If you sell a security at a loss and then repurchase the same (or substantially identical) security within the 61-day window — 30 days before the sale through 30 days after — the IRS will disallow your loss deduction.

However, the disallowed loss does not disappear. Instead, it is added to the cost basis of the repurchased security. That deferred loss will eventually reduce your gain when you finally sell. Nevertheless, timing matters — especially when you need the loss in the current tax year.

Wash Sale Example: What Goes Wrong

David sells 500 shares of ABC Tech ETF on October 15, 2026, at a $40,000 loss. On November 10, 2026 — only 26 days later — he repurchases the same ABC Tech ETF. That 26-day gap falls inside the 30-day window. As a result, the IRS disallows the $40,000 loss for 2026.

However, if David had instead purchased a different technology ETF — one that tracks a different index and holds different securities — the wash sale rule would not apply. He maintains similar market exposure without triggering the rule.

Substantially Identical: Where the Line Is Drawn

The IRS has not published a comprehensive bright-line definition of “substantially identical.” However, generally accepted guidance includes the following:

• Clearly identical: Selling a stock and buying the same stock. Selling an ETF and buying the exact same ETF from the same provider.
• Likely identical: Selling one S&P 500 index ETF and buying another S&P 500 index ETF that tracks the same index.
• Generally acceptable: Selling a Vanguard Total Market ETF and buying a Schwab Total Market ETF (different provider, slightly different holdings).
• Clearly acceptable: Selling a large-cap growth ETF and buying a different sector ETF with different underlying securities.

Wash Sale and Spousal/Related Party Purchases

The wash sale rule also applies if your spouse buys the same security within the window — even in a separate account. Similarly, a controlled corporation purchasing the same security can trigger the rule. Therefore, for family offices and high-net-worth households managing multiple accounts, a coordinated approach to tax reporting and filing across all accounts is essential.

What Are Advanced TLH Examples for High-Net-Worth Investors?

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For investors with complex portfolios — including restricted stock units (RSUs), concentrated equity positions, or income from a business sale — advanced TLH examples become essential. These are not just year-end moves. They require year-round monitoring and disciplined execution across multiple accounts.

TLH Example 3: Offsetting RSU Vesting Gains

Cross-border executives and corporate employees often receive restricted stock units (RSUs). When RSUs vest, the fair market value at vesting is taxed as ordinary income. However, if the executive then holds the shares and they drop in value, those shares can later be sold at a loss — generating a capital loss to offset future gains.

Example: Jennifer receives 10,000 RSUs that vest at $50 per share on January 15, 2026. She pays ordinary income tax on $500,000 of compensation income. By March, the stock drops to $38 per share. She sells the shares and generates a $120,000 short-term capital loss ($500,000 basis minus $380,000 proceeds). That loss offsets $120,000 of other short-term gains — which would otherwise be taxed at up to 37% plus 3.8% NIIT. The combined savings can exceed $48,000 in federal taxes alone.

TLH Example 4: Business Sale Gain Offset

Business owners selling a company in 2026 often face a large capital gain event. For instance, imagine a business owner who sells her company for a $2 million gain. If she also has a portfolio with $400,000 in unrealized losses, harvesting those losses directly offsets $400,000 of the business sale gain. At 23.8% combined federal rate, that harvesting saves her $95,200 in federal taxes.

This type of advance planning is why working with a tax strategy team before a business exit is so important. Losses must be realized in the same tax year as the gain. Furthermore, the entity structure of the selling entity affects how gains are characterized. An S Corp or pass-through entity may generate long-term capital gains that pair well with harvested long-term portfolio losses.

TLH Example 5: Multi-Account Lot Selection

Investors who hold the same security purchased at different times have multiple “lots” with different cost bases. Specific identification — also called “specific lot selection” — allows you to choose which lot to sell. This is a powerful TLH tool.

For example, an investor owns 3,000 shares of a mutual fund. She purchased 1,000 shares at $80 (a gain lot) and 2,000 shares at $120 (a loss lot). The current price is $100. By specifically identifying the 2,000-share loss lot to sell, she generates a $40,000 loss. Had she not specified, the broker might default to FIFO (first-in, first-out), selling the $80 gain lot first — triggering a $40,000 gain instead. That is a $80,000 swing in taxable income from a single decision. You report specific identification using Form 8949 with your tax return.

How Does the OBBBA Change TLH Planning in 2026?

The OBBBA, signed into law on July 4, 2025, fundamentally restructured the wealth transfer landscape. Understanding how TLH examples interact with these new rules is essential for families with $5M or more in net worth. Let’s break down the most important intersections.

Permanent Estate Exemption and Portfolio Strategy

Under the OBBBA, the federal estate, gift, and generation-skipping transfer (GST) tax exemption is now permanently set at $15 million per individual — up from $13.99 million in 2025. Married couples now have a combined $30 million exemption. For planning purposes, this removes the urgency of accelerated gifting that dominated strategies before the old sunset provision was eliminated.

However, it also changes how TLH interacts with gifting strategies. When you gift appreciated assets to heirs or trusts, you transfer the embedded gain — and potentially the TLH opportunity — along with the asset. Coordinating loss harvesting before a gift transfer can reduce the overall family tax burden by eliminating the embedded gain prior to transfer.

The 2026–2028 Senior Deduction Window

For taxpayers aged 65 and older, the OBBBA also created a temporary additional deduction of $6,000 per person (or $12,000 for qualifying married couples, both age 65+) for tax years 2025 through 2028. This is an above-the-line deduction that stacks on top of the standard deduction of $31,500 (MFJ) or $15,750 (single) for 2026.

This senior deduction creates an additional planning window. By combining TLH examples with the senior deduction and strategic Roth conversions, a retired high-net-worth couple could shield a significant amount of income from federal taxes in 2026, 2027, and 2028. However, the senior deduction phases out for individuals with modified AGI above $75,000 (single) or $150,000 (MFJ).

SALT Cap and TLH Coordination

The OBBBA also temporarily raised the state and local tax (SALT) deduction cap to $40,000 for tax years 2025 through 2029. For high-net-worth residents in high-tax states — New York, California, New Jersey — this increases the value of itemizing deductions. When you itemize, TLH gains additional relevance, because reducing your taxable income also compounds the value of other itemized deductions below phase-out thresholds.

For a comprehensive look at how these strategies fit your personal situation, review the MERNA Method — Uncle Kam’s proprietary tax planning framework that integrates TLH, estate planning, and income strategy into a single coordinated approach.

What Mistakes Should You Avoid When Using TLH Examples?

Understanding TLH examples also means knowing what to avoid. Even a perfectly structured loss harvest can be derailed by a procedural error or a compliance misstep. Here are the most costly mistakes high-net-worth investors make.

Mistake 1: Triggering Wash Sales Across Multiple Accounts

High-net-worth investors often have assets spread across taxable accounts, IRAs, 401(k)s, and trusts. The wash sale rule applies across all accounts you control — including IRA accounts. If you sell a security at a loss in a taxable account and repurchase it in your IRA within 30 days, the wash sale rule applies. The loss is disallowed — but it cannot be added to the IRA’s basis either, because IRA cost basis does not work the same way. You effectively lose the deduction permanently.

Mistake 2: Ignoring State Tax Treatment

Not all states conform to federal capital gains treatment. California, for example, taxes capital gains as ordinary income at rates up to 13.3%. TLH examples that produce federal savings of 23.8% may produce state savings of 13.3% in California — dramatically increasing the value of harvested losses. Conversely, some states have no capital gains tax at all. Your advisor must model both federal and state impact before executing.

Mistake 3: Overusing Charitable Donation Structures

In 2026, the IRS continues to scrutinize abusive donation valuation shelters — particularly schemes that artificially inflate the value of contributed assets for deduction purposes. The OBBBA introduced a 35% cap on deductions for households in the top 37% income bracket, including charitable deductions. Furthermore, giving is only deductible above 0.5% of income for itemizers under the new universal deduction framework. Any TLH-adjacent strategy that relies on inflated charitable deductions should be reviewed carefully by a qualified tax attorney before execution.

Mistake 4: Failing to Track Carryforward Losses

Many investors harvest losses in a given year but fail to apply them strategically in future years. Capital loss carryforwards are reported on Schedule D each year until exhausted. However, they do not automatically reduce withholding or estimated payments. As a result, investors overpay estimated taxes each quarter, losing the time value of money. A proactive tax advisory relationship ensures carryforwards are tracked and deployed optimally.

Uncle Kam in Action: $1.2M Portfolio Rescue

Client Snapshot: A cross-border executive and her husband — both U.S. citizens living in New York — came to Uncle Kam in Q4 of 2025. They had a $12 million multi-asset portfolio, including publicly traded equities, private equity interests, and international funds. Together, they earned approximately $2.4 million per year in combined income.

The Challenge: The couple had planned to sell a large block of appreciated stock — a $1.2 million long-term gain — to fund a family trust under the new OBBBA estate exemption rules. Without any offsetting strategy, their federal tax liability on the sale would have been approximately $285,600 (at 23.8% combined). On top of that, New York state tax at approximately 10.9% added another $130,800. Total tax burden: over $416,000.

The Uncle Kam Solution: Our team executed a four-part TLH strategy across their taxable portfolio in November 2025. We identified $480,000 in unrealized losses across three positions — two international equity ETFs and one sector fund. We sold all three positions on the same day, harvesting $480,000 in long-term losses. We immediately reinvested the proceeds into comparable — but not substantially identical — replacement funds to maintain their market exposure.

In addition, we identified that their trust structure would benefit from gifting low-basis assets before harvesting — reducing the embedded gain in the family trust. We coordinated the stock sale and loss harvest on the same Schedule D, creating a net gain of $720,000 instead of $1.2 million.

The Results (2026 filing year):

• Tax Savings: $114,240 in federal taxes saved (23.8% × $480,000). Plus $52,320 in New York state tax savings (10.9% × $480,000). Total savings: $166,560.
• Investment: Uncle Kam advisory fee: $18,000.
• Return on Investment: First-year ROI of 825% — over $9 saved for every $1 spent.

Moreover, $120,000 in additional carryforward losses were preserved for 2026 — positioned to offset future gains from their private equity portfolio. That is compounding value. View more outcomes like this on our client results page.

Related Resources

• Advanced Tax Strategies for High-Net-Worth Individuals
• 2026 Tax Strategy Planning for Investors and Business Owners
• Uncle Kam’s Complete Tax Strategy Guide Library
• Capital Gains Tax Calculators and Planning Tools
• The MERNA Method: Uncle Kam’s Proprietary Tax Framework

Next Steps

Ready to put these TLH examples to work in your own portfolio? Here are five concrete steps to take now.

• Review your taxable portfolio for unrealized loss positions by running a current cost-basis report from your brokerage.
• Identify any planned capital gain events in 2026 — such as business sales, RSU vesting schedules, or real estate dispositions.
• Engage an Uncle Kam tax advisor to model the net federal and state tax impact of harvesting specific lots before year-end.
• Review prior-year Schedule D returns for unused capital loss carryforwards you may not have tracked.
• Coordinate TLH with your estate plan under the new OBBBA $15M exemption to maximize family-wide tax efficiency.

Explore the full range of 2026 tax strategy services at Uncle Kam to get started today.

Frequently Asked Questions

What is the maximum capital loss you can deduct in 2026?

If your total capital losses exceed your total capital gains in 2026, you can deduct up to $3,000 of the net loss against your ordinary income. Any remaining net loss carries forward indefinitely to future tax years. There is no cap on how much you can carry forward. However, you can only use $3,000 per year against ordinary income until the carryforward is exhausted by capital gains. This rule applies to both short-term and long-term net losses after proper netting. Verify current rules at IRS Topic 409.

Does tax-loss harvesting make sense in a volatile 2026 market?

Yes — in fact, market volatility creates more TLH opportunities, not fewer. When asset prices swing widely, positions may briefly dip below your cost basis. That creates a window to harvest losses, reinvest into a similar position, and capture the tax deduction without sacrificing long-term market exposure. The key is acting quickly and avoiding the wash sale window. For high-net-worth investors, a dedicated advisory team that monitors portfolios daily can identify these windows as they arise — rather than waiting until December when many other investors compete for the same strategy.

Can I use TLH examples with international or foreign currency assets?

Yes, but with additional complexity. Foreign currency gains and losses generally are treated as ordinary income or loss for U.S. tax purposes under IRC Section 988 — not capital gains. However, foreign stocks, funds, and ETFs held in a U.S. taxable account do generate capital gains and losses subject to the standard TLH rules. Cross-border executives and family offices with significant foreign holdings must carefully classify each asset type before executing TLH. Mixing currency transaction losses with capital asset losses without proper classification is a common audit risk. A qualified advisor with international tax experience is essential in these situations.

How do TLH examples apply to trust and estate portfolios?

Trusts and estates file their own tax returns (Form 1041) and can also harvest capital losses within the trust. However, the compressed tax brackets for trusts in 2026 mean the highest ordinary income rate (37%) kicks in at a much lower income threshold than for individuals. As a result, TLH within a trust can be even more valuable on a per-dollar basis. Furthermore, the new $15M estate exemption under the OBBBA allows for more flexible gifting of loss positions into or out of trusts for coordinated family tax planning. Work with your estate attorney and tax advisor to align trust-level TLH with your broader family wealth plan.

Is tax-loss harvesting the same as tax avoidance or tax evasion?

No. Tax-loss harvesting is a fully legal, IRS-recognized tax planning strategy. It falls under the category of tax avoidance — the legal use of tax laws to reduce your liability. Tax evasion, by contrast, involves illegal concealment or misrepresentation of income. The IRS explicitly provides rules for capital loss treatment in Publication 550 and Topic 409. The only risk arises when TLH is executed incorrectly — for example, triggering a wash sale — or when losses are mischaracterized. A qualified tax advisor ensures every harvest is properly documented and compliant.

When is the best time of year to implement TLH strategies?

While many investors wait until November or December, the best TLH examples involve year-round monitoring. Losses can arise at any time during the year — especially in volatile markets. Waiting until year-end limits your options because you may have fewer loss positions available, and the wash sale window extends into the new tax year. For high-net-worth investors with complex portfolios, quarterly portfolio reviews and a standing TLH protocol with your advisor produce the best long-term results. Visit our 2026 Tax Calendar to align your harvesting strategy with key deadlines.

Last updated: March, 2026