Tax-loss harvesting is the year-end habit of selling positions that have lost value so the realized losses offset realized gains. Every brokerage and every robo-advisor will do it for you, automatically, across everything they can see. The gap is in the second half of that sentence. Your brokerage can see the public holdings. It cannot see the SAFE you signed in 2017, the convertible note that never converted, the angel round in a company that stopped sending updates, or the LLC interest in a fund that never issued a final K-1. Those positions never show a price, so they never show a loss, so they never make the list.
This is a checklist for the whole picture. The first part covers what your brokerage already handles, briefly, because you don’t need help with it. The rest covers the positions it can’t.
Part 1: the positions your brokerage can see
For public holdings, the checklist is short and your advisor or platform has probably already run it:
- Which positions are below cost basis, and by how much.
- Which lots are long-term and which are short-term, since losses offset gains of the same character first.
- Whether selling and rebuying anything would trip the 30-day wash-sale rule under §1091.
- What your realized gains for the year actually are — including gains from secondary sales of private company stock, which many investors in AI and other late-stage companies took in 2026 and which land on the same Schedule D as everything else.
If that last line applies to you, the number on it is the reason the rest of this page matters. Realized gains from a secondary sale are offset by realized losses, and the positions most likely to be sitting on unrealized losses are the ones in Part 2.
Part 2: the positions your brokerage can’t see
Make a list. Not from memory — from documents. Go through:
- Email for “SAFE,” “subscription agreement,” “convertible note,” “K-1,” “capital call,” “AngelList,” “Wefunder,” “syndicate.”
- Any cap-table or portfolio tool you’ve used: Carta, AngelList, Pulley, your own spreadsheet.
- Old wire confirmations and DocuSign folders.
- Prior-year returns, for any K-1 or 1099 from an entity you no longer hear from.
For each private position, write down what you hold (stock, preferred, SAFE, note, LLC or LP interest), what you paid, when, and the date of the last communication from the company. Then sort the list into three piles.
Pile A: positions with a document
The company told you it’s over. A dissolution filing, a bankruptcy notice showing zero recovery for your class, a K-1 marked final, a letter saying no proceeds are expected. These are the easiest to deal with, because the company handed you the event and the year. Bring the document to your advisor.
Pile B: positions that went silent
No filing, no letter, no final K-1. Updates stopped at some point and never resumed. The founders don’t answer. The website is parked or gone. You can’t tell whether the company wound up quietly or is sitting on a small balance somewhere. This is the most common case, and the hardest one for the usual tax tools, because there is no event to point to and no year to claim. See how to write off a startup that went silent.
Pile C: positions where the founder won’t give a date
The founder is reachable and friendly. Every year they say the same thing: still exploring a few options, some acquisition interest, nothing to announce. Nothing is dead, nothing is alive, and nothing ever closes. For harvesting purposes these are the worst of the three, because the one path that doesn’t need a buyer — a worthlessness claim — requires showing the company is wholly worthless, and the founder is on record saying it isn’t. See the founder says they’re still exploring options.
Part 3: the three ways a loss on a private position reaches a return
A loss needs a recognition event. For a position with no market there are three, and each fits different facts. Your advisor chooses; this is the map.
Claim it worthless (§165). You assert the position became wholly worthless in a specific year and support that with evidence. Fits Pile A. Struggles with Pile B and usually fails Pile C, because both the fact of worthlessness and the year are open. The amendment window is seven years for worthless securities precisely because the year is so often disputed.
Abandon it (§1.165-5(i)). You permanently surrender all rights in the position and receive nothing. No buyer needed. Requires an affirmative act of abandonment and, for stock, that you receive no consideration; the character of the loss depends on the instrument; your advisor determines it. Fits plain stock in a reachable company that will acknowledge the surrender. Fits less well for SAFEs, notes, and LLC interests, and for Pile B, where there is no one to surrender to. See selling vs. abandoning a dead startup position.
Sell it (§1001). You transfer the position to an unrelated buyer for consideration, under an executed agreement, on a date. The sale doesn’t ask whether the position is worth zero or when it got there; it asks what you transferred, to whom, for what, and when. Fits Pile B and Pile C, and any position where you want a dated fact rather than an argument. The obstacle is practical: there is no market, so you have to find a buyer.
A documented sale through DivestMe costs a flat $150 per position. DivestMe LLC is the buyer: it counter-signs the Asset Sale Agreement, takes the position outright and permanently, and delivers the executed agreement, a Certificate of Completion, and a record your preparer can attach. The purchase price is a nominal $1.00, because a position with no market has no price to discover; the dollar is consideration, not a valuation, and it is what makes the transaction a sale rather than an abandonment. DivestMe documents the sale and does not determine eligibility. Whether the loss is allowed, in what year, and in what character remains your advisor’s call. For the side-by-side of the first and third paths, see worthless-security deduction or sell it.
Part 4: the question to bring to your advisor
Not “can I harvest this?” but: Here is what I hold, what I paid, and the last thing I heard from the company. Which of the three paths do these facts support, and in which year?
If you took secondary gains this year, say so in the same conversation. The two halves of the harvesting question belong together, and the second half is the one that gets skipped when there is no screen reporting it.
What your advisor will need
Gather these before the conversation; they’re the same for both paths:
- What you bought, and from whom: stock, preferred, SAFE, note, LLC or LP interest.
- Cost basis — what you actually paid, plus any later contributions.
- Acquisition date, and the subscription or SAFE document itself.
- Every communication from the company since, including the last one.
- Any K-1 or 1099 ever received, and the last year one arrived.
- Whether the stock might be §1244 small-business stock (possible ordinary-loss treatment, subject to limits your advisor will check).
Add to that list, for each private position: whether your documents require the company’s consent to transfer, and whether the company is reachable to give it.
Timing
Harvesting is a calendar exercise, and private positions are slower than public ones. A public sale settles in a day. A private disposition has steps in front of it that aren’t on DivestMe’s clock: finding the documents, confirming whether a transfer consent is required, and talking to your advisor.
A sale counts for the year it closes. A disposition executed on December 31 belongs to that year; one executed on January 1 belongs to the next. If you and your advisor decide a sale is the right path and you want the loss in the current year, the paperwork has to be complete before year-end — not started.
If you think the position may have gone worthless in a prior year, raise that with your advisor before doing anything else. That’s a separate question with its own answer.
How a capital loss is reported
A loss on a capital asset is reported on Form 8949, with totals flowing to Schedule D. Capital losses offset capital gains; up to $3,000 of any remaining loss ($1,500 if married filing separately) can offset ordinary income in a year, and the rest carries forward to later years. An ordinary loss under §1244, where it applies, is reported on Form 4797. These are the reporting rules in IRS Publication 550; whether a loss is allowable, in what year, and in what character is determined by the taxpayer and their advisor.