Tax Center › ESPP Basics

To maximize the opportunity of ESPP participation you must understand the tax impact. This article explains the tax treatment that applies when you meet the ESPP holding-period requirement, along with the taxation of nonqualified ESPPs, some ESPP tax-planning concepts, and the tax calculation using Form 3922.

Now let's look at the employee tax issues associated with employee stock purchase plans (ESPPs). ESPP tax rules can be more confusing and less logical than those that govern stock options.

In Part 4 we consider the taxation of employee stock purchase plans (ESPPs) that are not qualified under Section 423, and the tax issues of down markets, death, and withholding.

The final rules clarify and consolidate a tangle of proposed, temporary, and final regulations, as well as other guidance, that governed the taxation of ISOs, including rules for disqualifying dispositions.

The final rules clarify and consolidate a tangle of proposed, temporary, and final regulations, as well as other guidance, that governed the taxation of ISOs, including rules for the $100,000 ISO limit.

The Global Tax Guide explains the taxation of equity awards in 43 countries: stock options, restricted stock, restricted stock units, performance shares, stock appreciation rights, and employee stock purchase plans. The country profiles are regularly reviewed and updated as needed. We do our best to keep the writing lively.

"Not qualified" means that your company's employee stock purchase plan (ESPP) does not meet the requirements under Section 423 of the Internal Revenue Code. Its mechanics and procedures may be the same as a tax-qualified ESPP, but the favorable tax treatment does not...

Your company is required to file Form 3922 with the IRS and either give you a copy or present the same information on a substitute document. The form contains information about your purchases in your company's tax-qualified ESPP during the prior tax year. With this reporting, the IRS now knows more information about your ESPP purchases than it did before, particularly with regard to your...

If you sell or otherwise dispose of the stock without meeting the holding period rules, then you owe taxes for the spread between the...

Companies make some information available voluntarily, while the reporting of other information is mandatory. Section 6039(a) of the Internal Revenue Code requires companies to send an information statement to employees who have exercised incentive stock options or have made purchases in a tax-qualified Section 423 employee stock purchase plan. ISO exercises are reported on IRS Form 3921. ESPP purchases are reported on IRS Form 3922...

The table in this FAQ shows the types of taxes, when they are triggered, and the tax withholding (if any) for various forms of equity compensation granted in the United States. For details, examples, and illustrations...

You may have both ordinary income and capital gain when you meet the holding-period requirements (this is a qualifying disposition under the tax code). The answer depends on whether...

ESPPs do not usually set a commission on purchases, so the company is probably not paying a commission directly for you. In the common ESPP structure, the broker or transfer agent charges...