Tax-Loss Harvesting on Robinhood: How I Use Tax Lots to Cut My Tax Bill

Do you have some stocks sitting at a loss in your portfolio? Before the year ends, those losses can actually do some good for you. They can cut down the taxes you owe on your gains. That’s called tax-loss harvesting.

And Robinhood has a feature that makes this much more powerful: selling by tax lot. For a long time you could only sell at your average cost, and you had no idea which shares were actually going out. Now you can pick them yourself. I started using it when I was adjusting my own capital gains and losses for the year, and it made a real difference.

In this guide I’ll show you how tax lots work, how to use the feature step by step, how your losses offset your gains, and the wash sale timing you need to get right in December.

I’m not a tax adviser. This is how I approach my own taxes, based on how the rules work. For your exact situation, check with a tax professional.

First, what’s a tax lot?

Every time you buy shares of a stock, that purchase is a tax lot: a number of shares, at a price, on a date. If you bought Nvidia three different times, you have three lots, each with its own cost.

Here’s the part most people don’t know. When you just tap Sell and type a number of shares, Robinhood uses first in, first out (FIFO). Your oldest shares are sold first. The app shows you an average cost, but that’s not what your taxes use.

So depending on which lot goes out, the exact same sale can be a gain or a loss. Let me show you:

Try it yourself. Pick which lot you’d sell:

You see the difference? Same stock, same day, same 10 shares, and a $500 swing in your taxable gain.

How to sell a specific tax lot on Robinhood

Here’s exactly how I do it in the app. In my video I show it live with Palantir, where most of my lots were in profit, and Nvidia, where some of my lots were at a loss.

How your losses actually lower your taxes

A quick recap first. Until you sell, a gain or a loss is unrealized, just a number on your screen. The moment you sell, it becomes realized, a capital gain or a capital loss, and that’s what goes on your taxes.

Gains on things you held a year or less are short-term and taxed like your regular income. Hold for more than a year and it’s long-term, which is taxed at lower rates. So if you’re close to the one-year mark on a winner, it can be worth waiting a few days before you sell.

Now, here’s where the losses go:

1. They cancel your gains first. $1,000 of gains and $1,000 of losses means you owe nothing on that $1,000.
2. Then up to $3,000 offsets your ordinary income. Your salary, side income, anything.
3. Anything left carries forward to next year, and the year after, with no time limit.

You don’t have to calculate all this yourself. Robinhood tracks everything, including options, and sends you a Form 1099 early in the new year. You’ll find it under Account → Tax center.

Don’t let the wash sale rule cancel your loss

This is the trap. The IRS doesn’t let you sell a stock at a loss just to book the loss and then buy it right back. That’s the wash sale rule.

If you buy the same stock, or something “substantially identical”, within 30 days before or after you sell at a loss, you can’t claim that loss for the year. It gets added to the cost of the new shares instead.

Here’s the example from my video. You bought a stock for $1,000 and sell it for $900 in late December, a $100 loss. Then in early January you buy it back for $950. That’s within 30 days, so it’s a wash sale. You can’t use the $100 loss this year, and your new cost basis becomes $1,050: the $950 you paid plus the $100 loss you couldn’t claim.

And this applies to options too. Selling Google at a loss and then buying a Google call within 30 days can count as a wash sale. I go deeper on the options side in my options trading taxes guide.

The fix: sell early, buy back late

The solution is simple. Don’t wait until the last week of December. Do your tax-loss harvesting in late November or early December, then wait at least 31 days before buying the stock back. If you still love the stock, you can buy it again in January, and your loss still counts for this year.

One more catch with tax lots: the 30 days before the sale count too. If you bought more shares of the same stock in the last 30 days, selling an older lot at a loss can still be a wash sale. Check your recent buys before you harvest.

My year-end tax-loss harvesting checklist

Most people scramble at tax time. Start planning now and you’ll keep more of your gains next April. And if you have questions about your own situation, put them in the comments on the videos. I’m not a licensed tax adviser, but I’ve been doing this on my own Robinhood account for a long time and I’m happy to point you in the right direction.

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