Employee Stock Purchase Plans, Taxes and You

[djedi]

It's almost tax time, the time of the year when people start thinking about their taxes and how mystifying they are. One topic that comes up among my coworkers is the ESPP plan: How long should they hold their shares? What is that mysterious sheet of paper that our company passes around asking you what ESPP shares you've sold? I ran across a good

Comments

[gregstoll]

You are truly doing God's work - I thought I understood this for a brief period, but I'm pretty sure I was wrong. Thanks! :-)

[gerdemb]

Thanks for bringing back all those bad memories from when I used to have stock options and had to file taxes. :) Since it only comes up once a year, I always had to re-remember all the rules. Who came up with this crazy system anyway?

[brittongregory]

"Many resources state that it's better to liquidate the stock on the purchase date, take your 15% - taxes and reinvest in a broader vehicle for the long term. YMMV."

You can count me among those resources. Unless you've got money to burn, why take guaranteed income -- essentially a variable-but-guaranteed bonus on top of your salary -- and turn it into a crap shoot? In the case of our little circle, you're likely talking about tech companies like NI, AMD, and Silabs, whose stock prices are particularly fickle. Your potential tax gains of ~10% (of the *profit*, not the total revenue!) can quite easily be wiped out by a small downward tick.

Not to mention the fact that now you're playing the market timing game, which is highly risky even when you're not dealing with the stock price of a single tech company...