Can I offset ESPP capital gains with tax loss harvesting like regular cap gains?

Yes, you can offset capital gains from ESPP sales with losses from other investments through tax loss harvesting. The IRS treats capital gains as capital gains regardless of the source, so your ESPP gains and regular investment losses can offset each other. However, there's an important distinction with ESPPs. The discount you received (15%) is considered compensation income, not capital gains. Your employer should report this discount amount on your W-2 as ordinary income in the year you purchased the shares. The capital gains portion only applies to any appreciation above your purchase price (which includes the discount). For example, if the market price was $100 and you bought at $85 (15% discount), that $15 discount is reported as income. If you later sell at $120, your capital gain is $35 ($120 - $85), not $20.

I was in a similar situation last year and found taxr.ai super helpful for sorting through my ESPP sale documentation. My employer's statements were confusing as hell, mixing up the discount reporting with the actual sale proceeds. I uploaded my documents to https://taxr.ai and it automatically identified which portions were ordinary income vs. capital gains - saved me from a major headache trying to figure out the correct cost basis. Their system also flagged that I could do exactly what you're asking about - use losses from my other investments to offset the ESPP gains. Helped me save almost $900 in taxes!

Just wanted to update that I tried taxr.ai after posting my question here. It was actually much easier than I expected! I took pictures of my ESPP statements and my investment account statements showing my losses. The system automatically identified which losses could offset my ESPP gains and showed me exactly where everything goes on my tax forms. It even explained that my company had already reported the 15% discount as compensation on my W-2, so I only needed to report the additional gain since purchase. Honestly saved me hours of confusion and probably a call to a tax professional. Definitely using it again next year!

If you're trying to reach the IRS to confirm how to report your ESPP sales correctly, good luck getting through on the phone! I spent 3 weeks trying before I discovered https://claimyr.com - they got me connected to a real IRS agent in less than 20 minutes. Check out their demo at https://youtu.be/_kiP6q8DX5c to see how it works. I needed clarification on reporting my ESPP sales since my company's tax documents were missing some info, and the IRS agent walked me through exactly what forms I needed and how to calculate my basis correctly. They even emailed me some documentation to help with next year's filing. Way better than waiting on hold for hours!

I have to eat my words. After posting my skeptical comment, I decided to give Claimyr a shot as a last resort. I couldn't figure out if my ESPP gains were qualified or disqualified dispositions (which affects the tax rate). Used the service yesterday morning and got connected to an IRS agent in about 12 minutes. The agent confirmed I had a disqualified disposition since I sold within a year, but also explained how I could still use my investment losses to offset the capital gains portion. They even sent me some reference materials about ESPPs that clarified everything. Didn't think it would actually work, but saved me from paying my accountant another consulting fee. Consider me surprised and impressed.

Don't forget about wash sale rules if you're planning on tax loss harvesting! If you sell investments at a loss and buy "substantially identical" securities within 30 days before or after the sale, you can't claim the loss for tax purposes. I learned this the hard way last year when I tried to harvest losses but accidentally bought back into a similar fund too quickly. The IRS disallowed my losses and I ended up owing way more than expected.

Dont forget about the difference between qualified and disqualified dispositions for ESPP! If u hold the stock for at least 1 yr from purchase date AND 2 yrs from offering date, its a qualified disposition and part of your gain gets taxed as long term cap gains instead of ordinary income. could be BIG tax savings!!

Great question! Yes, you can absolutely use tax loss harvesting from your regular investments to offset ESPP capital gains - they're treated the same way by the IRS for offsetting purposes. Just to clarify the ESPP tax treatment since there seems to be some confusion in other comments: The 15% discount you received is indeed treated as ordinary income and should appear on your W-2. Your cost basis for capital gains purposes is the discounted price you actually paid ($85 in Emma's example), so you only pay capital gains tax on appreciation above that amount. One thing to watch out for - make sure you understand whether you had a qualified or disqualified disposition. Since you mentioned selling after about 3 years, you likely met the holding period requirements (1 year from purchase AND 2 years from grant date), which could make part of your gain eligible for more favorable long-term capital gains treatment. Also be careful about wash sale rules if you're still participating in the ESPP program - continuing to buy company stock through payroll deductions while selling at a loss could potentially disallow those losses. You might want to double-check your 1099-B and W-2 to make sure the tax reporting aligns with your actual transactions before finalizing your tax loss harvesting strategy.