ESPP Tax Calculator

A sale more than two years after the grant date (the start of the offering period, Form 3922 box 1) and more than one year after the purchase date (box 2). Both must be met. A qualifying sale taxes as ordinary income only the smaller of your actual gain and the discount measured at the grant date; the rest is long-term capital gain.

The whole discount at purchase, the price on the purchase date (box 4) minus what you paid (box 5), is ordinary income, even if you later sold for less. That amount is added to your basis, so a sale below the purchase-date price produces a capital loss. The capital part is short-term if you held the shares a year or less after purchase.

For shares from options granted after 2013, brokers report your purchase price as the basis and leave out the ordinary income already taxed on your W-2. On Form 8949, keep the reported basis in column (e), enter code B in column (f), and put the difference as a negative number in column (g). If the basis was not reported to the IRS, enter the correct basis in column (e) instead. Skip this and the discount is taxed twice.

The price per share you would have paid if the shares had been bought on the grant date, used by lookback plans. On a qualifying sale, the ordinary income is capped at box 3 minus box 8: the discount measured at the grant date. If box 8 is blank, the price was fixed at grant and box 5 is used.

No. Income from a section 423 employee stock purchase plan is not subject to FICA, and employers do not withhold income tax on it. Because nothing is withheld, a large disqualifying sale can leave you owing tax when you file.

Not always. A qualifying sale usually means less ordinary income, but the shares can fall while you wait, and if the price drops below the grant-date price a qualifying sale can produce less ordinary income only because there is less gain. Many people sell immediately to lock in the discount. The calculator shows the tax difference at the price you enter; the price risk is yours to judge.