When is the real deadline to sell stock for tax loss harvesting - December 31 or earlier?

The date that matters for tax loss harvesting is the trade date, not the settlement date. So yes, December 31st is indeed the deadline for executing your sales to count for the current tax year. This is spelled out in IRS Publication 550 which states that stock trades are recorded on the trade date for tax purposes, even though the actual settlement might happen a couple days later (typically T+2 or two business days after the trade date in current markets). As for market hours, any trade executed on December 31st counts - including after-hours trading. So if you place a sell order at 7pm on New Year's Eve and it executes, that still counts for the current tax year. Just make sure your order actually executes - sometimes after-hours can have limited liquidity.

Just wanted to share my experience with this! Last year I was stressing about the exact same question and ended up using https://taxr.ai to review my trading history and tax loss harvesting strategy. They confirmed what was mentioned above but also flagged something important I hadn't considered - wash sale rules that would have invalidated some of my planned harvesting. The service scanned my portfolio and identified which specific lots I should sell for maximum tax benefit (and which ones to avoid selling due to potential wash sale issues). Saved me from making a costly mistake where I would have repurchased similar securities too soon after selling.

Just wanted to follow up - I ended up trying taxr.ai after asking about it here and wow, totally worth it! I was making a huge mistake with my tax loss harvesting strategy. I had been planning to sell some losers in my Fidelity account while buying similar (but not identical) ETFs in my Vanguard account. The analysis showed me this would have triggered wash sales since the IRS looks across all your accounts. They gave me a clear report showing exactly which lots to sell and when I could safely repurchase similar securities. Honestly saved me thousands in deductions I would have accidentally invalidated. Super grateful for the recommendation!

If anyone's trying to reach the IRS for clarification on this or other tax questions, good luck! I spent THREE HOURS on hold last week trying to get someone to verify some tax loss harvesting rules. After my third attempt, I found https://claimyr.com and used their service to hold my place in line. You can see how it works here: https://youtu.be/_kiP6q8DX5c They called me when an IRS agent was about to pick up so I didn't waste my entire day on hold. The agent confirmed everything mentioned above about the December 31 trade date being what matters, not the settlement date. Also got clarity on some specific questions about my situation with foreign stocks.

I was super skeptical about Claimyr when I saw it mentioned here (as you can see from my response above). But after another frustrating failed attempt to reach someone at the IRS about some complicated tax loss harvesting questions I had, I decided to give it a try. It actually works exactly as described. I got a call back about 2.5 hours after signing up, and suddenly I was talking to an actual IRS representative who answered all my questions about trade dates vs. settlement dates for tax purposes. After spending literal days trying to get through on my own, I'm completely converted. Would have saved myself a lot of stress if I'd tried it sooner.

Don't forget about the "substantially identical" rule with tax loss harvesting! You can't sell a stock for a loss and then buy back the same stock or a "substantially identical" security within 30 days before or after the sale (aka the wash sale rule). This tripped me up last year - I sold some losing positions on December 31st but had already set up automatic investments for January 2nd that bought back some of the same funds. Completely invalidated my tax loss! 😩

I almost messed up my tax loss harvesting by forgetting about the special rules for mutual funds! If anyone's planning to sell mutual funds (not ETFs) on December 31st, remember that mutual funds only trade once per day after market close. You have to place your order before the fund's cutoff time (usually 4pm Eastern) for it to execute on that day. Miss the cutoff and your trade gets processed on the next business day, which would be next year!

Just want to add another important timing consideration - if you're planning to do tax loss harvesting with international stocks or ADRs (American Depositary Receipts), be extra careful about the settlement timing. While US stocks typically settle T+2, some international securities can have longer settlement periods. Also, if you're holding stocks in a foreign market that trades on a different schedule (like Tokyo or London), make sure you understand when their December 31st equivalent deadline falls in your local time zone. I had a friend who missed harvesting losses on some European stocks because he didn't account for the time difference properly. The key takeaway remains the same - it's the trade date that matters, not settlement - but just wanted to flag these additional complexities for anyone with international holdings in their portfolio.