Ordinary income vs capital gain when you sell qualified ESPP shares.
About the ESPP Tax calculator
An Employee Stock Purchase Plan (ESPP) lets you buy company stock at a discount, often with a lookback. When you sell after a qualifying holding period (more than 2 years from the offering date and 1 year from purchase), the tax splits in two: the discount from the offering price is taxed as ordinary income, and the rest of the gain gets preferential long-term capital gains rates. ESPP income isn't subject to FICA. This calculator estimates that split and the total tax for a qualifying disposition.
Frequently asked questions
How is a qualifying ESPP disposition taxed?
The ordinary-income portion is the lesser of the offering-date discount or your actual gain, per share. The remaining gain is taxed at long-term capital gains rates. ESPP income isn't subject to FICA.
What is a qualifying vs disqualifying ESPP disposition?
A qualifying disposition is held more than 2 years from the offering date and 1 year from purchase, which maximizes the long-term capital gains portion. Selling sooner is disqualifying — more of the gain is taxed as ordinary income. This calculator models the qualifying case.
Is ESPP income subject to FICA or AMT?
No. Unlike RSUs or NQSO exercises, ESPP ordinary income isn't subject to Social Security or Medicare tax, and there's no AMT — only income tax on the ordinary and capital-gains portions.
How much can an ESPP discount save me?
Qualified §423 plans allow up to a 15% discount, and a lookback can apply that discount to the lower of the offering or purchase price — often a meaningful, low-risk return. The tax on the discount is the trade-off this calculator quantifies.