Tax-Loss Harvesting When You Hold Concentrated Company Stock

By Trevor Scotto, CPA, CFP®

This article is for educational purposes only and does not constitute individualized tax, legal, or investment advice. Tax laws are subject to change. The impact of any strategy depends on your specific income, filing status, cost basis, state of residence, and broader financial situation. Consult your own tax and legal advisors before acting on anything described here.

Tax-loss harvesting is the practice of selling a security that has declined in value below its cost basis in order to realize a capital loss. That loss may then be used to offset capital gains recognized elsewhere in your portfolio, potentially reducing the amount of taxable gain you report in a given year. Any net capital loss that exceeds your gains may offset up to $3,000 of ordinary income per year, with the remainder carried forward to future tax years under current law.

The strategy does not permanently eliminate tax. When you sell the replacement investment later at a gain, your basis in that replacement is lower (because you bought it after harvesting the loss), so the deferred gain will eventually surface. Tax-loss harvesting is designed to shift the timing of tax, not eliminate it entirely, and whether that timing benefit is worthwhile depends on your individual tax situation, future rates, and investment results. There is no guarantee that harvested losses will reduce your overall lifetime tax bill.

For tech professionals at companies like Anthropic, Meta, Google, Nvidia, Microsoft, Stripe, ServiceNow, and OpenAI who hold substantial employer stock, the opportunity to harvest losses may be more readily available than it first appears, for reasons specific to how that stock was acquired. Learn more about our approach to investment management and tax planning and mitigation.

The defining feature of a concentrated position built through RSU vesting is that the shares arrive in batches, each with a different cost basis. For RSU shares, the tax basis is the fair market value of the shares on the settlement date, which is the day the income was recognized and reported on Form W-2. (IRS Publication 525, Taxable and Nontaxable Income, as of July 2026.) Shares that vested when your employer's stock traded at a higher price have a correspondingly higher basis per share; shares that vested at a lower price have a lower basis per share.

This lot-by-lot structure means that even if your employer's stock has appreciated significantly overall, individual lots purchased at higher points may be sitting at a loss relative to their specific basis. A concentrated holder with multiple RSU tranche vestings over several years may have meaningful unrealized losses in high-basis lots sitting alongside large unrealized gains in low-basis lots. That combination is precisely what creates harvesting opportunities even within a single-company position.

For shares acquired through exercised non-qualified stock options (NSOs), the cost basis equals the fair market value at the time of exercise, which is also the amount reported as ordinary income. For incentive stock options (ISOs), the regular-tax basis is the exercise price; however, the alternative minimum tax (AMT) basis is increased by the spread recognized at exercise. These basis differences must be tracked carefully across tax systems when evaluating the gain or loss on a subsequent sale.

Because equity-compensated professionals often accumulate many lots across multiple vesting or exercise events, each with its own basis and holding period, there is frequently both a large embedded gain in the oldest low-basis lots and a set of more recently acquired lots that are currently underwater. This scattered-lot structure is one reason why tax-loss harvesting in a concentrated-stock context requires lot-level review rather than a single look at the position as a whole.

The wash-sale rule is the primary constraint on tax-loss harvesting. Under the rule, if you sell a security at a loss and buy a substantially identical security within 30 days before or after the sale, the loss is disallowed for tax purposes. The disallowed loss is not permanently forfeited; instead, it is added to the cost basis of the replacement shares. The wash-sale period runs 30 days before the sale and 30 days after, making it a 61-day window in total. (IRS Publication 550 (2025), Wash Sales section, as of July 2026.)

For a concentrated employer stock holder, the wash-sale rule creates a practical complication. If you sell shares in a high-basis lot to harvest a loss, you cannot buy back shares of the same company stock within the 30-day window without disallowing the loss. This matters particularly if you have unvested RSUs continuing to deliver shares of the same stock automatically. RSU vestings that occur within the wash-sale window may trigger the wash-sale rule on recently harvested losses, depending on the specific facts and timing.

The substantially identical standard has not been extended by statute to cover exchange-traded funds (ETFs) that track similar sectors or indices, but the IRS has not issued definitive guidance on all scenarios. Replacing harvested shares with a diversified ETF or a different company's stock in the same sector is a common approach to preserving economic exposure while avoiding a wash sale, though the appropriate replacement depends on your specific situation and should be reviewed with your tax advisor. There is no guarantee that any chosen replacement will be treated as not substantially identical in all circumstances.

Tax-loss harvesting is most useful when understood as a component of a broader strategy for managing concentrated single-stock risk, not as a substitute for diversification itself. A concentrated employer stock position carries risks that are distinct from those of a diversified portfolio: company-specific volatility, correlation between your employment income and your investment portfolio, and the possibility of permanent capital impairment if the company underperforms.

Harvesting losses from a concentrated position may generate tax benefits that help offset the cost of selling appreciated shares to diversify. For example, if you harvest losses in high-basis lots that have declined and use those losses to offset gains realized from selling low-basis lots (which you may want to reduce for diversification reasons), the net gain you report could be lower than if you had sold the low-basis shares alone. This is one way loss harvesting and a diversification schedule can work together.

But the strategy does not work in reverse: harvesting losses does not eliminate the underlying concentration risk. A stock that drops enough to create harvestable losses is also a stock that has declined in value, which illustrates the risk of concentration directly. The goal is to use the tax tool thoughtfully as part of a plan that is ultimately designed to reduce single-stock exposure over time.

Our equity compensation planning approach is designed to coordinate tax-loss harvesting, lot selection, and diversification decisions together under one integrated plan, so your tax strategy and your investment strategy move in the same direction.

A few planning considerations are worth keeping in mind for equity-compensated professionals evaluating whether tax-loss harvesting may apply to their situation:

• Lot identification matters. You can direct your broker to sell specific lots rather than relying on default accounting methods such as first-in, first-out (FIFO). Choosing to sell high-basis lots that are currently at a loss, rather than low-basis lots that carry large gains, requires affirmative lot-level identification at or before the time of sale. This should be confirmed with your custodian and documented carefully.
• Holding period affects the character of any gain or loss. Losses on shares held one year or less are short-term; losses on shares held more than one year are long-term. Short-term losses first offset short-term gains (taxed at ordinary income rates); long-term losses first offset long-term gains. The character of harvested losses can affect their usefulness depending on the character of your offsetting gains.
• Ongoing RSU vestings create wash-sale exposure. If your employer continues to vest RSUs into your account, new shares of the same stock are being acquired on a schedule you do not fully control. A vesting event within 30 days after you harvest a loss on the same stock could trigger the wash-sale rule on that loss. Working with your advisor and CPA before harvesting losses in a position that is still actively vesting is important to avoid unintended disallowances.
• State tax treatment may differ. California, for example, taxes capital gains as ordinary income and does not provide a preferential long-term rate. Your state of residence affects the after-tax benefit of any harvesting strategy, and a full-year state tax projection should be part of the analysis.
• Year-end picture may differ from mid-year estimates. Tax-loss harvesting decisions are most effective when made in the context of a full-year tax projection that accounts for all income sources, expected vesting events, and other transactions. A loss harvested in isolation, without visibility into the rest of the year, may produce a smaller benefit than anticipated or may interact with other income in unexpected ways.

For questions about how these considerations may apply to your situation, we encourage you to consult your own tax and legal advisors before acting.

Tax-loss harvesting in a concentrated-stock context is not a standalone transaction. It requires coordination across several dimensions: lot-level cost basis tracking, wash-sale monitoring (including awareness of ongoing vesting schedules), holding-period analysis, and integration with the broader diversification plan. When the person making the harvesting decision and the person preparing the tax return are operating in separate silos, there is meaningful risk of missed opportunities or unintended wash-sale disallowances.

At FFG Wealth, our fee-only, fiduciary model means CPA advisors and wealth managers work from the same plan under one roof. The same team tracking your RSU vesting schedule is the team monitoring your portfolio for harvesting opportunities and the team preparing your annual return. No commissions, no product sales. Just coordinated advice designed to keep your tax strategy and your investment strategy aligned.

This integrated structure is particularly relevant for professionals managing concentrated employer stock, where the tax mechanics of individual lots, the wash-sale exposure from ongoing vestings, and the long-term diversification objective all need to be considered together rather than independently.

If you hold concentrated employer stock and want to understand how tax-loss harvesting may fit into your overall equity and tax plan, we invite you to explore our equity compensation planning services, our approach to tax planning and mitigation, and our investment management philosophy. We also encourage you to schedule a conversation with our team.

Does tax-loss harvesting apply to RSUs?

Tax-loss harvesting can apply to shares acquired through RSU vesting if those shares have declined in value below their cost basis since settlement. For RSU shares, the cost basis is the fair market value on the settlement date, which is the day the income was recognized on your W-2. If the stock's price has declined below that settlement-date value, the difference is a capital loss that may be harvestable. The wash-sale rule applies: you cannot buy back substantially identical shares within 30 days before or after the sale without disallowing the loss. (IRS Publication 550 (2025), Wash Sales section, as of July 2026.) Consult your tax advisor about your specific lots and timing before acting.

What is the wash-sale rule?

The wash-sale rule disallows a capital loss on the sale of a security if you buy a substantially identical security within 30 days before or after the sale. The disallowed loss is not permanently forfeited; it is added to the basis of the replacement shares, deferring the loss until you sell those replacement shares. The rule applies to a 61-day window centered on the sale date (30 days before through 30 days after). (IRS Publication 550 (2025), Wash Sales section, as of July 2026.) Consult your tax advisor to confirm how the rule applies to your specific transactions.

Can I harvest losses on employer stock and still hold for long-term gains on the rest?

Yes, in principle, because tax-loss harvesting is done at the lot level. If your employer stock position includes multiple lots with different cost bases, you may be able to sell specific high-basis lots that are currently at a loss while retaining other lots that carry significant unrealized gains. This requires affirmative lot identification at the time of sale and careful attention to the wash-sale rule across all lots of the same security. The retained low-basis lots would continue to accumulate a holding period toward long-term status, but the trade-off is continued single-stock concentration risk on those shares. Consult your tax advisor about your specific lot structure before acting.

How does ongoing RSU vesting affect tax-loss harvesting?

If your employer continues to vest RSUs into your account, you are periodically acquiring new shares of the same stock on a schedule set by your grant agreement. A vesting event within 30 days after you harvest a loss on the same stock could trigger the wash-sale rule on that loss, disallowing it. Because vesting timing is generally outside your control, harvesting losses in a stock that is still actively vesting requires careful planning with your advisor and CPA, ideally as part of a full-year projection rather than a one-off transaction decision.

Is tax-loss harvesting a substitute for diversifying a concentrated position?

No. Tax-loss harvesting is a tax-timing tool that may help reduce current-year taxable gains. It does not reduce single-stock concentration risk. A position that generates harvestable losses is also a position that has declined in value, which itself illustrates the risk of concentration. The more useful framing is that tax-loss harvesting can be one component of a broader diversification plan: losses harvested from high-basis lots may generate a tax offset that helps reduce the net gain from selling low-basis lots to diversify. But the goal of managing single-stock risk requires a deliberate diversification strategy, and harvesting losses alone does not substitute for that plan.