3 ms·

I don't know if it's universal, but ESPP tends to be post tax, correct? Meaning when the purchase is made, then I decide to sell, I only have to pay tax on the

• ctchocula 4y ago
  No, if you sell within 24 months of start of offering period it counts as Disqualifying Disposition and the discount (FMV on purchase date minus purchase price) is taxed as ordinary income and anything on top as cap gains. If you sell more than 24 months from start of offering period, you have Qualifying Disposition and get to compute discount as min(FMV at start of offering period minus price you would have gotten had you purchased on start of offering period, sell price minus purchase price) and use that for ordinary income with the rest of gains as cap gains. Since stocks generally go up, waiting (2 years - offering period) for QD to use discount % x FMV at start of offering period can be more beneficial than discount % x FMV on purchase date, because you may end up paying less ordinary income and more cap gains. However, you do need to incur more risk to hold an individual stock for 2 years. Conversely, if the stock goes down then DQ may actually lead to you paying less in ordinary income, so you should pay attention to how the numbers look, how confident you are in your company's equity and what your IPS says.