Is tax-loss harvesting worth it for substantial capital losses?

Thanks for the reply! What about the potential downsides to this approach? Would I be giving up any future tax benefits by using up my losses now instead of carrying them forward? Also, how do wash sale rules apply when you're selling at a gain rather than a loss?

There aren't many downsides to using your losses against gains - that's exactly what they're intended for. The $3k limit only applies to offsetting ordinary income. You can use unlimited capital losses to offset capital gains. Since your losses would take decades to use up at $3k/year, accelerating their use is generally advantageous. Wash sale rules only apply when selling at a loss, not a gain. If you're selling investments at a gain, you can repurchase the same securities immediately without any wash sale concerns. This gives you flexibility to realize gains while maintaining your investment positions if desired.

Does it work with cryptocurrency losses too? I've got a pile of those from 2022 and no idea how to optimize them against my stock gains.

I'm curious - how does it compare to what my brokerage already offers? Fidelity has some tax lot optimization tools, but they seem pretty basic. Does taxr.ai actually tell you which specific investments to sell and when, or is it more general advice?

Yes, it definitely works with cryptocurrency losses. It can analyze your complete portfolio including stocks, ETFs, mutual funds, and crypto. It actually helped me optimize some of my bitcoin losses against gains in my stock portfolio. It goes way beyond what brokerages offer. While Fidelity and others have basic tax lot selection, taxr.ai looks at your entire investment picture across accounts and makes specific recommendations about which lots to sell and when. It's much more sophisticated than the basic "sell highest cost basis first" advice brokerages typically offer. It created a multi-year optimization strategy for me rather than just focusing on the current tax year.

Wait, how does this actually work? Does it somehow bypass the IRS phone system? Seems too good to be true - I've literally spent hours trying to get through.

Sorry but this sounds like BS. Nothing can get you through the IRS phone lines. I've tried calling at all hours of the day, different days of the week. There's no "hack" that can bypass millions of people trying to call them. If this worked, everyone would use it and it would stop working.

It doesn't bypass the system - it automates the calling process. Basically, it uses technology to continuously call the IRS for you and navigates the phone tree automatically. When it finally gets through to an agent, it calls YOUR phone and connects you. So instead of you personally redialing and waiting on hold for hours, their system does the work. I was skeptical too! I thought it sounded impossible, but it actually worked. I'm not saying it's instantaneous - it took about 17 minutes for me - but that's versus the 3+ hours I spent trying on my own without ever reaching anyone. The IRS has even stated they're answering less than 20% of calls, so having a system continuously try for you makes a huge difference.

I've thought about it but wasn't sure if my situation warranted a CPA. Would you mind sharing roughly what you paid for that service? And did they help specifically with tax-loss harvesting strategies or more general tax planning?

I paid around $350 for the initial consultation and tax plan development, and then about $400 for each year's tax return preparation. Considering he saved me over $8,000 in taxes through better loss harvesting strategies and finding missed deductions, it was absolutely worth it. He specifically helped with creating a tax-loss harvesting strategy across multiple years, identifying which specific investments to sell when, and properly documenting everything for the IRS. He also advised on how to structure my investments going forward to be more tax-efficient. For someone with $207k in losses like you have, the potential tax savings would likely be much higher than what I experienced.

Not OP, but I'm guessing crypto or maybe options trading. Those are usually the culprits when you see wild swings like $267k gain followed by $210k loss. Regular stock investing rarely produces that kind of volatility unless you're heavily concentrated in a few speculative stocks.

It was a combination of factors. I had a concentrated position in a few tech stocks that did extremely well in 2022, and I got overconfident. In 2023, I started trading options with larger positions than I should have, and then doubled down when things started going south. I also had some crypto that crashed. The perfect storm basically. I've definitely learned my lesson about diversification and position sizing. I'm working with much smaller position sizes now and have moved a significant portion of my portfolio to index funds. Still have some individual stocks but with strict limits on how much I allocate to any single position.