Author Topic: ESPP tax question (with example)  (Read 3301 times)

Emanonrog

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ESPP tax question (with example)
« on: March 18, 2015, 08:27:51 PM »
Question about ESPPs...  I held on to my company's stock for the full 2 years from the grant date before I sold, so I wasn't taxes through my w-2 for a disqualifying disposition.  My stock has gone up quite a bit in two years.  Say the purchase price with discount was $8.50 (15% discount on $10), and I sold it for $15. 

Assuming I bought $10,000 worth (1,176.47 shares), my total gain is $7,647.06.  $5,882.35 from appreciation (1,176.47 * $5) and $1,764.71 from the discounted purchase price (1.176.47 * $1.50).

My understanding is that I owe :
-15% LTCG tax on $5,882.35 = $882.35
-Income tax at my marginal rate, say 25%, on $1,764.71 = $441.18

Am I doing that correctly?

My tax software, H&R Block, seems to be calculating the LTCG portion correctly (after I override the cost basis to be $11,764.70 instead of $10,000), but I don't think the Income portion of the gain is being captured anywhere.

Am I missing something?

seattlecyclone

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Re: ESPP tax question (with example)
« Reply #1 on: March 18, 2015, 09:29:24 PM »
Are you sure the $1,764.71 wasn't included on your W-2? For my wife's ESPP the broker reports your sales back to the company so they know when and how much income to report.

MDM

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Re: ESPP tax question (with example)
« Reply #2 on: March 18, 2015, 09:56:17 PM »
E.g., see http://www.fairmark.com/execcomp/espp/qualifying.htm:
Quote
...check your W-2. It may be difficult to isolate this amount because it is not listed separately. One clue would be to compare the number in box 1 (your total wages) with the number in box 3 (social security wages), because this income should appear in box 1 but not in box 3.

Emanonrog

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Re: ESPP tax question (with example)
« Reply #3 on: March 19, 2015, 05:03:30 AM »
I'm sure that my w-2 does not include the gain.  It's only required to be shown there if you have a disqualifying disposition.  If you have a qualifying disposition (you held the stock for more than 2 years from the grant date), it could be reported on your w-2, but it isn't required to be.

seattlecyclone

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Re: ESPP tax question (with example)
« Reply #4 on: March 19, 2015, 09:15:40 AM »
This income counts as wage income and should be reported on Line 7 of your Form 1040 along with the income reported on your W-2. Figure out some way to make your tax software make that happen, or just fill out the form yourself.

ncornilsen

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Re: ESPP tax question (with example)
« Reply #5 on: March 19, 2015, 11:09:19 AM »
On what date did you sell it?