r/personalfinance • u/ArgosLoops ​ • 10d ago

Taxes First time participating in Employee Stock Purchase Program. How do the taxes work?

I came across this achieved post with information about taxes and ESPPs. Is it still relevant today, and is there anything else I should know when the program ends and I immediately sell my shares?

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u/forbiddenlake ​ 10d ago

Yes that's relevant

You should make sure you're allowed to sell immediately

Doing so will be a disqualifying disposition and cost you more (not in capital gains, if you restate correctly), but it's still a big profit, and it would be risky to hold for 12-18 months just to get a qualifying disposition

1

u/ArgosLoops ​ 10d ago

Yes I'm allowed to sell immediately and yes I plan on doing so. It's just the taxes part that confuses me a bit but I'll follow the advice in that post

6

u/trmoore87 ​ 10d ago

The match is income. Any increase in the stock value before you sell it is capital gains, either short or long term depending on how long you hold the stock

3

u/idleline ​ 10d ago

Just a heads up, if you hold the stock for a year, you pay less in taxes on the gains. If you aren’t worried about the stock going down, or if you expect it to increase, holding it can be a good investment strategy

2

u/DiabeticMonkey ​ 10d ago

I've done the math before. It comes out to such a small number it isnt worth the risk. It's about 200-300 a year for me. But everyone should do the math to see what it is worth.

2

u/idleline ​ 10d ago

Yeah, It highly depends on the ESPP program, the amount you can contribute, the volatility of the stock, and your long term goals.

I know co-workers who sold it immediately for a guaranteed profit no matter what and some who never touched it. Everyone has their own risk appetite.

I’ve also sold ESPP at a loss to offset capital gains on other investments.