423-Qualified ESPP Tax Calculator
04/26/2012 - 10:53
- An ESPP is a benefit plan that allows employees to purchase stock from their
company at below market price. Usually income from your paycheck is withheld for a
certain period of time (say, 6 months) and then used to buy stock at the end of the
- Your tax rate for the transaction depends on how long you hold the stock before selling it.
- To get favorable tax treatment, you have to hold the stock for 2 years after the
grant of the ESPP (the start of the withholding period) and 1 year after the stock is
purchased. Assuming a 6 month withholding period, you'd need to hold the stock for
18 months after purchase to fulfull the holding period.
- Since this is a 423-qualfied ESPP, there is no tax when the stock is purchased,
only when the stock is sold.
- I am an accounting hobbyist and not a tax professional. These calculations are just for fun! Don't trust me! Don't blame me! Don't tase me!
- Disqualifying Distribution
- Selling the stock before end of the holding period
- Qualifying Distribution
- Selling the stock after the end of the holding period
- Market Price
- The stock price on the open market on the day that the stock is purchased.
- Lookback Price
The stock price that is used to set the actual price for employees (the more
generous the plan, the longer the lookback
Employees purchase stock at a discount on the lookback price. Usually between
10% - 15%.
- Sale Price
- The stock price when you sell
- Regular tax rate
- Your tax rate for ordinary income
- Long-term capital gains tax rate
- The current tax rate for long-term capital gains (default 15%)
- How much you will invest in the ESPP in a given period
|Income from sale:|
|Pre-tax profit from sale:|
|Gain/Loss for qualifying distribution:|
|Short-term capital gains:|
|Long-term capital gains:|