Employee Stock Purchase Plans: The Basics & Taxes

Many public companies offer a qualified Section 423 Employee Stock Purchase Plan (ESPP) as a benefit to their employees. This video will simplify everything you need to know about your ESPP.

- How does an ESPP work?
- What are the benefits of an ESPP?
- Should I participate in my ESPP?
- How is an ESPP taxed?
- What factors go into deciding when I should sell my ESPP stock?

#personalfinance #money #stockcompensation

[otstan]

my god I wish my company had hired you to explain this to us instead.... they hired all these fancy people and I was falling asleep with all their fancy words you got straight to the point. thank you!

[jallred]

I've looked at a lot of online content about this and how to calculate the ordinary income portion of the profit and that graphic the best explanation that I've seen so far. Thanks!

[FernandoBowen-]

I believe the retirement crisis will get even worse. Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.

[Luther_Luffeigh]

This is the best ESPP explanation I have seen on YouTube

[cathywaters]

Thank you for this, it was very helpful and you did a great job breaking the ESPP process down!

[Jacobhopkins]

Thank you for the visual. After several videos I was so confused on the tax implications but the graphic made complete sense.

[rosezhang]

8:15 - exactly what I'm looking for in this time where most tech stocks have been going down. Thank you!

[neerajgene]

always learn the stuff about stocks so much better when I look at your vides. Thanks for doing these!

[itchypandaa]

This was so helpful, thank you so much!!! :) My first ESPP plan so this was so helpful for figuring out when I should sell them.

[seangallagher]

Excellent explanation, very clear and easy to understand. Thank you!

[c]

The chart is pretty amazing, thank you very much. I will subscribe your channel.

[hansangb]

Really straight forward explanation! Thanks

[ltgemini]

Enrollment just started. This was helpful. Thank you.

[PlayYouAChopin]

At 5:12, why is cost basis the blue line and not the 8.50 line? Thanks!

[bryanm]

Good stuff thank you. I'm a CPA and you know more about this then i fuckin do.

[carrie]

If ESPP fund is after tax fund, W2 Box 1 should not be included ESPP fund. So only at the time selling ESPP, the related oridinary income tax and Capital Gain tax need to be calculated.

[dusbus]

So to simplify if I sell before two years i'm taxed on the discount plus the look back. After two years I'm only taxed on the discount. Either way the discount is taxed at ordinary income tax rate while the stock is taxed at normal capital gains rates whether it be STCG or LTCG. Is this correct?

If the above is correct it seems like if the stock price went down over the ESPP period it would be a good idea to consider selling before the two-year window because you didn't gain any look back advantage.

Edit: just rewatched @08:12 that my second statement is explained

[zhirley]

So, to take advantage of the lowest tax rate, it would make sense to hold the stocks for 1 (from the purchase date) or 2 years( from the offering date)and then sell them only if the actual price of the share increases in value or goes beyond the offering price. So I would say ordinary income has a higher tax rate than Long-term capital gain?

[yukakalia]

Thank you for the clear example! I have a question for a different situation: If the price was $15 on the offering date and dropped to $10 on the purchase date, then I sold it at $20 after 2 years from the offering date, how much will become capital gain? $5 or $10?

[rajatjethwani]

Very helpful. My company has 4 purchase periods within each offering period. Have a doubt how does the look back apply during the 2nd purchase period - does it look back all the way back to the offering date or the start date of the 2nd purchase period?