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There is an IRS limit but other than that, technically yes. 15% gain which people recommend going max every time if you can.

All I lose out on is having access to the money for 6 months ?

Is there an easy way to calculate if it’s worth it from a tax standpoint ?

yep, youll mainly have a smaller paycheck for 6 months and if youre over the limit, the overpayment will get refunded in the next paycheck.

I am not a tax expert but I think any gains will be treated as normal income like normal stocks

Be very mindful of when the prices are set. It's possible that your guaranteed 15% return can represent a net loss.

But yes in general this is a gold mine, gives you all kinds of options to either liquidate cash immediately or hold for tax purposes or because you've bought a performing stock at a low price and a discount.

You're contributing after tax money to the ESPP so you would only pay capital gains on the money above and beyond your contributions. So, you won't actually make 15% but even at the highest tax brackets, you're only paying 37% of the difference to taxes.

I max my ESPP out and sell it immediately and have been doing that for the past 6 years. It's even better if there is a look back period and the stock has gone up appreciably.

The price is the lower of the price on Jan 1 or June 30 - the discount.

If you have a lookback provision, 100% do this.

The only two risks are - if you sell immediately - the following:

1. Stock falls of a cliff between when you purchase the shares and when they settle and are made available for sale;

2. You have a theoretical opportunity cost that exceeds the 15% discount

For an example of (2), if you have CC debt at 30% interest, you'd probably be better off just paying it down than contributing to an ESPP; while the ESPP does offer a significant gain, if you're indebted elsewhere this may be a problem.

You're also subject to the 25k annual cap.

The price is the lower of the price on Jan 1 or June 30 - the discount. It’s all purchased July 1.

Right. The small risk you run is that the strike price on June 30 is something high (for easy math, say it's $100) and then your CEO gets discovered on July 1 to be snorting coke off his CFO's belly while the board is lighting cigars with sawbucks and watching and the stock price tumbles to $50 while your shares are not yet sellable in your account because they haven't settled yet.

Makes sense. It’s an extremely stable stock so I’m assuming it’s low risk.

Based on your other replies, the ESPP gives you a 15% discount with a six-month lookback, and no holding period. So yes, this is practically guaranteed return of roughly 15%, even after taxes. As long as you can cashflow your expenses to account for the money going into the ESPP instead of your bank account, then this is a good way to get extra benefit from your employer.

The worst case scenario would be from the fact that there's usually a small window between when the buy executes and your subsequent sale, since it can take a few days for everything to settle. So it's possible that during that window your employer's stock price plummets below even your discounted price. But unless it's an extremely volatile stock that's generally not likely.

The best case scenario is that the stock price rises dramatically between Jan 1 and Jun 30. You buy at the Jan 1 price (minus discount) and sell at the July 1-3 price and pocket the profit.

One thing to be aware of is how you'll need to report this on your tax return for purposes of properly calculating short-term capital gains. When you do an immediate sale, the "discount portion" of the transaction gets reported on your W-2 as part of your compensation. Using that "buy stock worth $100 for $85" example, your employer essentially pays you that $15 difference, it just went straight into the stock purchase instead of your paycheck. The IRS taxes that $15 along with the rest of your pay.

But on the 1099-B you get from the brokerage, the "basis" of those shares will be the discounted $85 price that you paid. If you use that number as-is, then it'll look like you realized a $15 capital gain, which the IRS will tax. But that $15 was already reported on your W-2, resulting in you double taxing yourself.

The fix is to do a "basis adjustment" to bring the stock's basis up to the fair market value as of the date of purchase, basically adding back the dollars already reported on your W-2 so they don't get included again when calculating gains. There are steps on the Schedule D to do that. Most tax prep software is getting better about walking you through the adjustment if you tell it that these shares were obtained through an ESPP.

Definitely take advantage of this. I mean it's the closest thing you're going to get to a guaranteed 15% return. And it's really more like 17.5%.

We are a a progressive tax system. It is always worth it to make more. People need to stop making this statement because it’s essentially an old wives tales. And it’s not so much about you but just I see this comment far to often.

As to the money yes ESPP programs are always free money and you should always max it out if you can afford no access to that income for the 6 month period. I just autosell it. Only time in your life besides, 401k match, that people will hand you free money.

And its even better if the stock goes up significantly. The 15% is the floor, not the ceiling, and thats about the best deal you'll ever find anywhere.